Financial Pros Answer Your Top Questions

Q: Are annuities a good investment choice right now? Does the government bailout of AIG affect my AIG annuity?

Hutchins: "Annuities are contracts in which you turn your money over to an insurance company, and the insurance company promises to return it plus some predetermined rate of return, which may be based upon interest rates, market indices or some combination of the two. Your money, therefore, becomes the insurance company's money. If they go belly up, so can some, much, or all of your annuity. That is one risk, [but it is] alleviated if the government comes to your insurance company's rescue. ... The primary benefit annuities offer is tax deferral, and the ability to convert your savings into a guaranteed (assuming the insurance company remains solvent) stream of lifetime income. The higher your tax rate, the more beneficial is an annuity from a tax perspective; and the higher interest rates, the larger the lifetime income you can lock in, [but] historically speaking, both income tax rates and interest rates are low so annuities may not be a particularly attractive investment option at this time."

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Brendan McNamar, founder, WiseWealth Inc., Mesa, Ariz.: "Your AIG annuities are safe. AIG bought high-quality bonds to match the obligation to you when you bought the contract. These are separate from the parent company's financial problems. Annuities are not attractive during times of low interest rates. You have to pay a lot for a little income. They are more attractive, for part of your portfolio, when interest rates are higher and are expected to move lower. They should always be bought directly from a company like Vanguard or Berkshire Hathaway, with no sales person."

Q: What do the bank mergers -- JPMorgan Chase and Washington Mutual, Bank of America and Merrill Lynch, Citigroup and Wachovia -- mean for average bank customers like me?

Winterhalter: "For the time being, things should continue just as they always have. You will be able to make deposits and withdrawals normally. In time, the bank name may change on your account, but you can continue with your regular banking. Now is a good time to make sure your bank or savings and loan institution is FDIC insured. Go to www.fdic.gov/deposit/ and look for "Find Bank." FDIC Insurance covers up to $100,000 per depositor per bank. Certain bank retirement accounts are insured up to $250,000/owner. This insurance covers all types of deposits at an insured bank, including checking, savings, money markets and certificates of deposit. The insurance limit can only be increased if the accounts are held in different categories of ownership."

Paul Palazzo, Managing Director of Financial Planning, L.J. Altfest & Co. Inc, New York: "If you had money in two banks that have now merged, be careful that your total does not exceed insured limits. If your bank is insured by the FDIC, the money you hold in checking, savings and NOW (negotiated orders of withdrawal) accounts, as well as CDs and bank money markets, is protected up to certain limits -- $100,000 per person per bank, and another $100,000 per person for accounts held jointly. If you're wondering if your bank is covered, check at www.fdic.gov or call 877-ASK-FDIC."

Hutchins: "As a borrower, the underlying cause of the mergers signals tighter credit and you may find it more difficult to borrow. Your cost of borrowing is also likely to rise."