By David FlaumThe Commercial Appeal Q: I received a non-punitive settlement and want to invest to shelter not only the principal, but also the earnings. This is to protect other income. I live on a limited fixed income and need the settlement and any earnings for retirement as I have no other source for retirement earnings. I may also need it to pay medical expenses not covered by Medicare. What do you suggest? --C. M.
A: A fixed or variable annuity may be the appropriate investment to meet your needs, so long as you don't put 100 percent of your investments into annuities, says E. Denby Brandon, a certified financial planner with Branco Planning Co. in Memphis.
The earnings accumulated in an annuity aren't taxed until you withdraw them. And you may set up the annuity so you receive payments as long as you live and arrange to have survivor benefits for your spouse.
A fixed annuity promises a set rate of return over the period you own it. A variable annuity, with stock investments, will have ups and downs in its annual returns. Depending on your feelings about risk and your need for income, you may want to put some of your money in a variable policy with the prospects of increasing your investment return and your future income, Brandon says.
But, he adds, "We wouldn't want to take any extra risk if it isn't necessary."
If you buy an annuity, check the status of the company issuing it. Because the only guaranty behind an annuity is the backing of the insurance company writing the policy, you want to buy from a firm that is strong financially.
(Write David Flaum at The Commercial Appeal, 495 Union Ave., Memphis, TN 38103 or e-mail falum@gomemphis.com .)
