Can someone help my grandmother with a question she has on an annuity?

Question

Right now, she has a lump sum in a Genworth annuity that is only returning about 4%. Any money she takes out now is taxable (it was non-taxable going in). Is there a way to transfer the balance or at least the priciple to another higher yielding annuity? What kind of fees or penalties would she be looking at? Is there another investment that may have a higher yield? Who can answer her questions... because I am clueless. :-)

Answer 1

Annuities (in general) stink.

She will only be taxed on her earnings coming out. There is a 1035 exchange she can make to avoid the taxes now. There may be a redemption fee with Genworth.

Genworth is the only reliable place to find out about the exit fee. For an "exchange" for a lower fee alternative... Call Vanguard, Fidelity or T. Rowe Price.

Vanguard, Fidelity or T. Rowe Price have annuities that cost less and have many mutual funds to choose from (with different levels of risk).

These things are sold as a "tax advantage"... but in general they don't work out that way.