Widow needs a new strategy

DEAR BRUCE: I need help. I am a 75-year-old widow with little income. My modest home is paid for. I have $40,000 in CDs, but interest rates are dropping to the point where I can’t live on the small checks anymore. I have had several salesmen trying to sell me annuities, which will pay a higher interest rate, but are they safe? They are not federally insured. I hope you can help me. - Reader in Arizona

DEAR READER: Annuities are an insurance contract, as safe as the insurance company that issues them. The troublesome part of annuities: If you need to withdraw your money, the penalties can be severe. I don’t know that you are going to get enough interest to accomplish what you have described. Even though you called your home modest, there may be enough equity there to justify a reverse mortgage. This would allow you to stay in your home for the rest of your life but provide a bit of income, which has no restrictions and absolutely no risk. Even a 2 percent or 3 percent raise from the interest you can get from the annuity is not likely to make much of a difference in your lifestyle. A 3 percent difference would only amount to about $100 a month. A reverse mortgage may be the way to go. Check with your local bank. I’m sure it can steer you in the right direction.

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