DEAR HARRY: My parents are in their late 70s, and they are pretty well-off. They are sitting on about $800,000 in cash as a result of maturing and called tax-free bonds. They also have about $100,000 in good mutual funds. They almost are able to live on their pensions and Social Security. They are being pushed by a family member to invest about $650,000 of their cash in immediate-index annuities. My sister and I are not too happy about this because we've seen your opinion about annuities in general. In addition, the sample agreement we have seen has a number of variable charges that can hit hard. What's your opinion in my parents' case?
WHAT HARRY SAYS: Because your parents have a good source of fixed income in their pensions and Social Security, I don't see the need for more from an annuity, even an annuity tied to some index. If you pressed me, I could see a fixed annuity to give them enough to fill the gap in their monthly living costs. It appears now that we may see modest increases in the rate on tax-frees, so cash is OK to hold for those investments. I also can suggest that they consider putting about one-third of their cash into their present mutual-fund holdings or others that they choose. They can go to Fidelity, T. Rowe Price and Vanguard for their recommendations. Today's life expectancies are high, and your parents are young enough to have a heavier investment in stocks for the long run.
Email Harry Gross at harrygrossDN@gmail.com, or
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