I have a non-qualifying annuity With Foresters, that I bought 2 years ago, I know I’ll have to pay a 7% penalty for early withdrawal, but do I have to pay tax on that money, I bought it with the proceeds from the sale of my home after my spouse passed. The annuity has increased in value by $1558.80 since I bought it. I’m going to use the proceeds to purchase a new home.
SAVAGE SAYS: Annuities are designed for the long-term tax-deferred accumulation of money — not for short-term purposes. Did you tell the annuity salesperson that you were planning to buy a new home. ?If so, it is absolutely unconscionable that he/she locked your money into this kind of annuity, where there are huge penalties to take the money out!? If I were you, I would complain to the company that sold this to you, and then tol the state insurance regulators. It is totally unsuitable as an investment in your situation. And you know who gets that 7% penalty That is the money that covers the commissions that have already been paid to the salesperson who sold the annuity!
Perhaps, if you can’t break out of this invetment without penalty, you would be better off renting your next home, living on your income from Social Security or other assets, untl the penalty period has expired. And do check how long the penalty lasts, probably at least 7 years, and perhaps as long as 10 years. That “locked in” feature is what makes annuities a bad deal for seniors.
Please write back after you talk to the company and let me know what they say. Feel free to tell them I was the person who suggested you contact them regarding the “suitability” of this annuity for your situation.