I have a friend who's asking for advice on her CDs and an annuity

[magellan]

Why me, I have no idea about these things, but she has no one else so I'd like to help her.

She has 2 CDs, one $16K one $2600. She also has an annuity that started out at $165K, now down to $111K. She wants to know if she should cash them out or what. She could use the money now, and is also a little worried about the risks of leaving them where they are. (The CDs are with HSBC I think.)

Any advice greatly appreciated.

[grannie4peace]

1. i'm not an expert at all.

i had some $ last year & feared this would happen so i spent most of it, fixing my house & helping my kids. but i learned a lesson.... her cd's should be o.k. unless the fdic goes down. but the annuity will keep losing unless she does something. she should ask a financial person about that. i only lost a few thousand for my ira--because i got old enough to take it out. she should really do something soon--so tell her to call the people who have her cd's , they should be able to help her :):)

[magellan]

5. She's thinking along the same lines as you

...why lose the money, she could really use it now. I recently read advice from DUers to someone else asking about CDs, saying they should hang onto them, but I couldn't find the thread. That sentiment is being repeated here, so at least that much is resolved.

I think I'm going to have to find out more from her about the annuity, who holds it, etc....

Thanks, grannie4peace!

[willing dwarf]

2. Well if her CD's are with an FDIC insured bank

she should leave them alone. Their rate is guaranteed, and if she cashes them early, she'll loose a couple month's interest. The annuity -- I have no idea. Most things you cash now are worth less than they were a while ago. IF congress passes a deal, the markets will probably get happy for a while, and the value of stocks and mutual funds may go up during that period. That would be the time to sell, not now. Of course, who knows what those feckers on Wall St will do. Not me.

[magellan]

6. I need to find out the particulars of her annuity

There are different kinds, right? And I think one kind is safe while the other isn't. But it's all moot until I know what she has and who with.

Damn. She's elderly, low income since her husband passed away unexpectedly, and in bad health. This is the last thing she needs to be worrying about.

[Snarkoleptic]

3. She needs to be mindful of FDIC limits.

In general terms, you should never have more than $100K linked to your SS# in any single institution.

How much insurance coverage does the FDIC provide?
The basic insurance amount is $100,000 per depositor, per insured bank.

The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured.

The following sections describe the eight ownership categories recognized by FDIC regulations and the requirements that must be met to have coverage beyond the basic $100,000 insurance amount

More here-
http://www.fdic.gov/deposit/deposits/insured/basics.html

[metapunditedgy]

4. FDIC limits

I echo that. It's always worth checking to find exactly where the money is invested. If you have two separate investment accounts, for example, they might both be invested in CDs in the same bank, and then you would not have as much coverage as you thought.

Also, be mindful of the security level of investments. I had a money fund "break the bank;" most people don't expect to lose (or even know you can lose) money in a money market fund, since they're marketed as being such a cautious investment. But they're not FDIC insured, and you're ultimately at the mercy of the fund manager.

It's not always clear if your deposits are FDIC insured, as well. Money market _funds_ are not the same as _accounts_, etc. If in doubt, get written verification from your bank or broker that the account is FDIC insured.

[magellan]

8. She's all right on the CDs though, isn't she?

Less than $100K between them so even if they're with the same bank they should be covered by FDIC?

I'll convey the info about the money market funds to her.

Thanks, both of you!

[metapunditedgy]

10. Ok on CDs I would think

I'm pretty sure, but I'm not an expert, so my opinion isn't worth much. To be 100% sure, you could just check with the banks who offer the CDs.

As a side note, I checked with my bank and they said that, since I have a joint account with my spouse, we are actually insured up to $200K (not that we need it these days).

As another side note, if you have investments (such as stocks) held with a broker, it's possible that they could be lost if the brokerage itself goes under. Since FDIC does not cover this situation, brokers generally have a different kind of insurance called SIPC.

[magellan]

12. Thanks

And btw, welcome to DU! :hi:

[Joanne98]

7. HSBC is in some trouble. Here's some news

Sify HSBC cuts 1100 jobs globally
Indianapolis Star, United States - 14 hours ago
HONG KONG » HSBC Holdings PLC, Europe's largest bank by market value, on Friday announced it is cutting 1100 jobs worldwide in the wake of the financial ...
Banking giant HSBC to cut 1100 jobs worldwide Xinhua
HSBC to cut 1100 jobs worldwide New Straits Times
HSBC Cuts 1100 Jobs in Wholesale Banking Division (Update3) Bloomberg
Forbes - The Canadian Press
all 685 news articles » HBC - HCS - OTC:HOKCY

ITV.com HSBC hikes mortgage rates on market turmoil
International Herald Tribune, France - 21 hours ago
LONDON: HSBC Holdings is hiking the cost of its fixed mortgages from Friday in reaction to credit market turbulence last week, a move widely expected by ...
Cost of mortgages to increase again Financial Times
Halifax to raise rates across its range of mortgages by up to 0.49 ... Times Online
HSBC cuts 500 jobs in crisis Aberdeen Evening Express
Management Today - Sky News
all 241 news articles » HBC - HCS - EPA:HSB

http://news.google.com/news?sourceid=navclient&ie=UTF-8&rlz=1T4GGIG_enUS236US236&q=HSBC&um=1&sa=N&tab=wn

[magellan]

9. Yeah, they're our bank too

AND the one we have a business account with in the UK. But none of our accounts is anywhere near $100K or the insured limit over there.

We're sweating it.

[dixiegrrrrl]

11. go to bankrate.com which has safety ratings of all banks.

If you are in a local bank with high ratings, it is better than being in a regional bank or state bank with low ratings.
If you can, move your money to a bank with high ratings.
No 100% guarantees, but lower risk.

I personally prefer my local community bank, and would be even happier if I had a credit union close by, which I do not have.

We are in uncharted territory with known scoundrels running the show, so there is a lot of confusing information around.
Some people feel ok with leaving their funds in the market, some don't.
Some people think FDIC will cover all banks, some don't.

I feel safer having a certain amount of cash at hand just in case the power goes out, hurricane strikes, etc. Around here ATMS sometimes malfunction.

Btw...cashing in an annuity may have tax consequences.

[magellan]

13. Thanks, dixiegrrrl

In uncharted territory indeed. I'm not sure what information to trust on the health any financial institution anymore, and I'm certain others are feeling the same way. Not a good situation from any standpoint.

I'm grateful to all of you for your advice. :hi: