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Question for the Money Doctors

Question submitted on Jul 14, 2021.

Question

Which investment is better for me for a term of 7-10 years, a Variable Annuity or an IRA, if I am 52 years of age, plan to retire at 62 with CALSTRS, I have a mortgage of $450 at 2.5% interest for 30 years, and I already contribute a little bit to a 403b?

Answer

Deciding between a Variable Annuity and an IRA are two different types of accounts, not only investments.   A variable annuity is an annuity that is generally invested in mutual funds.  A variable annuity can be held in an IRA account.   However, with a variable annuity you need to watch out for the ongoing expenses, costs, and surrender charges.   An IRA can also be invested in mutual funds, but at a much lower cost.

In your case, I would suggest maximizing your contribution to your 403(b).    Since you are 52, you can put up to $26,000 into your 403(b).  Your employer may also match your contribution.   You will need to review your investment choices in your 403(b) and allocate them according to your retirement time horizon and risk profile.

Good luck!


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