Q&A: Considering an Annuity
Q – I have recently received a legacy of $50,000 from my mother’s estate. I was thinking of buying an annuity with the funds. I am 67 years old and want a secure investment. What are your thoughts on this plan? – Angela I.
A – If possible, I would hold off, for a couple of reasons. First, interest rates are gradually starting to move higher. As they do so, annuities will offer increasingly better returns. Second, you are still relatively young. The payout from an annuity is based on a combination of your age (the older you are, the more you’ll receive each month) and interest rates.
Therefore it’s likely that if you could wait until you are in your early 70s to buy the annuity, you would get a better payout than will be available today. In the meantime, you can keep the money in a GIC or high-interest savings account. – G.P.