In the past year or so, your column has regularly said that there is no good-return safe investment at this time. What is your opinion of the following: A financial adviser has recommended putting $100,000 in a fixed-index annuity guaranteeing 6.5 percent. This would double to $200,000 in 10 years, at which time it would guarantee $9,000 per year for life or cash out. What is the catch, when all other investments are much less? — D.P., Elgin
No catch, just a serious misunderstanding on your part, or misrepresentation from the salesperson. A typical offer for a fixed-index annuity involves a 10-year deferral before any cash is removed. During that time, what is called the withdrawal benefit value of your account will grow at a rate that varies with different contracts. The withdrawal benefit value is not the actual cash value of your account. It is only a number used to determine what your guaranteed lifetime income will be when you start making withdrawals.
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