in Glenview. Following a review of Lynn's provided documentation, Budzyn told me it didn't appear anything unethical or unlawful had occurred with regard to the surrender fee Lynn's mother had been charged. He noted that the $250,000 had been moved from one annuity to another. "The previous annuity had probably matured and was rolled over into a new one to maintain tax-deferred status. Otherwise, she would have had to pay taxes on the gain." He explained: "Depending on the previous annuity's initial investment amount, if she had cashed out, she could have been looking at tens of thousands of dollars in gains." Budzyn added that annuities are actually ideally suited for people in their 60s and 70s. "Those are the primary buyers of annuities and the people who benefit most from such investments." As for the flexible withdrawal rider, Budzyn explained this is an option that's available – for a price – for individuals desiring more liquidity. "In my practice, I lean toward zero-year or very short-term surrender charge annuities because you can't predict what is going to happen in the future. In [Lynn's mother's] case, she could have made it a zero-year surrender charge product by adding the flexible withdrawal rider. But the trade-off is you don't receive as high an interest rate." Jim Ray, director and private wealth adviser at BMO Private Bank, provided me a quick primer on annuities. Below is a highly abbreviated summary of his very thorough explanation.
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