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General Finance – Indexed Annuity vs. Cash

Q: What do you think of an indexed annuity as an alternative to cash? It would be capped at 6 percent, lower than the potential in the market but higher than any other interest that would be the principal. 

 

A: As a rule of thumb you should always keep 3-6 months worth of expenses in cash, CDs, or something similar.  I understand that it is not paying you much but you need to be able to get to this money if you have a true emergency.  These indexed annuities are very expensive and they lock up your money for years.  Take any extra money and invest it safely somewhere for a decent return.  I would question anyone who is offering this to you as a solution for cash.  They are a commissioned life insurance salesperson.

 

Below is the link to NAPFA.  You can go here to find a “Fee Only” advisor.

www.napfa.org


 

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