Avoid annuity for income

I am 80, a widow, living alone on social security, plus supplemental income from an annuity and a mutual fund. I am considering investing $23,000 in an annuity. Or should I hold the cash in a money-market certificate for use later even though it means paying tax on the income? Mrs. V. F.

At your age you should retain some flexibility. Once you buy a single-premium annuity and begin collecting monthly payments, you lose access to the principal. Instead, consider keeping the $23,000 cash in a money-market mutual fund. It allows more flexibility in withdrawing income, plus small amounts of principal, than a money market CD -- even the six-month type popular now. You could draw $250 a month from a money-market mutual fund yielding 13 percent for more than 28 years before the principal would be depleted. Or you could draw $276 a month for 17 1/2 years. These figures are from a chart of capital withdrawals for income from $23,000. (Capital withdrawal charts are available from The Writing Works, Box 752, Mercer Island, Wash. 98040. Send 50 cents plus self-addressed stamped envelope.) Taxes on your supplemental income will be slight, as social security benefits are not taxed. Flexibility and retaining access to your funds are reaso ns for not buying an annuity.

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