What Is An Annuity And How Does It Work?

Tania's in Illinois hey Tonya how are

you hi thanks for taking my call Dave

I'm so pleased this week with you you

too what's up well I'm hoping you can

guide me I think I've made a big mistake

my husband and I just started doing your

plan in August and it's been amazing but

we're on baby step 2 but this has to do

with an old 403 B that I've had

nothing's being contributed to it but

earlier in the year back in April we

went to the financial planning services

that my company sponsors and pays for

and they did a full workup and I had

been kind of having sleepless nights

because my my value would go from I'd

lose like $20,000 you know and then I

get anyway there was a lot of risk so

they suggested that I moved some money a

hundred and sixty six thousand into a

traditional annuity within my 403 B

retirement account guaranteed so right

now 30% of my 577 that's thousand that's

in there is now in this annuity and now

that I've started listening to you we're

following your steps I'm starting to

realize that probably what's a huge

mistake yeah and I don't know what to do

I'll contact them and see if they can

reverse that and put it back into mutual

funds okay cuz um they said it would be

like a 10-year process that's taking you

know attempt out each year and so that's

so they put you in something inside of a

retirement account with a surrender

charge oh I don't know

no these guys are absolute screwballs so

I need to if yeah it's in my my 403 B

and it's some kind of retirement

Saamy penalties are what your surrender

charges are and and you may be stuck

there but the other thing you gotta

weigh it against is you're probably

making 2% on this thing instead of 10 or


okay and so if you're if you're if your

surrender charge is 10%

take it and move it put it in something

that makes 10% more the first

you recoup okay gotcha

what makes once you know I don't know

what your surrender charge is though the

stupid thing might be 40% I don't know

so call them and ask them about syringe

Oh tell them tell them that you are

really upset now that you learn what it

is they actually sold you that you they

put you in a surrender charge product

inside of a retirement account which is

absolutely screwed up that's ridiculous

I mean you've got two sets of penalties

on this money now if you get if you need

to get to it right the government and

these idiots

yeah so now I don't know I don't know

what they're gonna do but see if what

they can do to get you out I would tell

them you're not happy with them and we

want to get you moved and see if you can

lean on them a little bit and get it

moved and then get some advice from

somebody else before you make any more

moves and like a smart vest or probe

that has a clue what they're doing so

Wow all right let's stop a second what

is an annuity an annuity is a life

insurance company product it's a savings

account with a life insurance company

there are two types of savings accounts

with life insurance companies fixed and

variable fixed pays you basically a CD

rate one or two percent right now which

is what she's in and it grows inside of

an annuity tax deferred like a 401k or

an IRA does and you pay extra fees for

the annuity so here's what's happened

you have a tax deferred 403 B and they

moved her into a substandard horrible

rate of return that she's paying extra

fees for and is also tax deferred that's

redundant there's tax deferral on the

tax deferral you can't double dip on

this you get one shot at this

and she already had all that for free

because it's inside the 403 B it didn't

need to be in an annuity

but she got scared with her risk

tolerance with the stuff moving back and

forth and so these groups dropped her

into this thing why is that bad because

then they put you on a surrender charge

and then it takes seven years to be able

to get your money moved out of there

without getting hit with some kind of a

charge and gut-punched and so there is

zero times never not a case anywhere

that a fixed annuity is the answer

never there's always something better

because a fruit jar at least doesn't

penalize you when you take the money out

early and you're not making much more

money on it than the fruit jar anyway

you can also do a variable annuity which

is a fine product but not inside of a

retirement account the variable

annuities are mutual funds inside of an

annuity and they have some actual

benefits after you've maxed out all of

your retirement accounts not against

variable annuities once you've maxed out

everything and you paid off your house

but you'll need to use a variable

annuity inside of there you're paying

extra fees for the tax deferral and the

benefits of the annuity and you don't

need to pay for that because it's

already in the side of a retirement