NEW YORK (CNN/Money) - My husband invested $50,000 in an annuity with Acacia National Life Insurance Company 15 years ago. The annuity is now worth $138,000. With all that's going on in the insurance industry, we're wondering whether this money is safe. We're considering withdrawing some of the money, but we'll owe taxes if we do. What do you recommend?

-- Mary Bajich, Peoria, Arizona

Okay, we've got two issues here: first, whether the money in your annuity is secure, and second, whether you should withdraw some of the money from your annuity. Let's start with the security issue.

It's no secret that many insurance companies have been having a rough time lately, what with losses in the stock and corporate bond markets and other problems. Why, just last December, Conseco, Inc., the corporate parent of several insurers, declared bankruptcy, and over the past year or so ratings agencies like A.M. Best Company have been lowering many insurers' financial strength ratings. So I understand your concern about security.

The question you must ask yourself to gauge whether the money in your annuity is vulnerable is this: Does the insurance company that issued my annuity have the financial resources to meet its obligations?

Unless you're an insurance company analyst, that can be a very difficult call to make. Which is why we rely on the financial strength ratings issued by ratings companies like Standard & Poor's, Moody's and A.M. Best.

These ratings aren't a guarantee that an insurer won't fail or run into financial problems at some point in the future. But the higher the ratings, the lower the odds the company will run into problems later on.

Your vulnerability also depends on the type of annuity you own. If you own a fixed annuity -- essentially, a CD-like investment issued by an insurance company -- then the security of your investment is directly related to the financial health of the insurer.

If, on the other hand, you own a variable annuity -- an annuity that allows you to invest in mutual fund-like accounts called subaccounts -- your money is largely immune to an insurer's financial problems.

I've sketched out the basics here, but you should examine these issues more carefully. In order to do that, I suggest you read a recent column I wrote on the subject of annuity safety. There, you'll find a fuller discussion of the various issues regarding annuity security, including links to ratings firms so you can get the current rating on your insurer.

Now to the issue of withdrawing money. Yes, you will owe taxes on your gains when you withdraw money from your annuity.

There's no way around this, since annuities provide tax-deferred gains, not tax-free gains. But there are a few little wrinkles about annuity taxation you should understand.

First, all gains in an annuity are taxed at ordinary income rates, regardless of whether your return came in the form of interest or long-term capital gains (which you would get through the subaccounts in a variable annuity).

There's also the issue of how much of your withdrawal is taxed. If you withdraw all of your money, then you would be taxed only on the portion of withdrawal that represents a gain. In your case, that means you would pay tax on $88,000 ($138,000 value minus your original $50,000 investment).

If you pull out only a portion of your money, say, $10,000, the entire ten grand would be considered taxable -- no part of that withdrawal would be considered a nontaxable return of your original investment.

That's because the rules that govern annuity taxation say that only after you've withdrawn all gains is a withdrawal considered a return of your original capital. So in your case, your withdrawals would have to total $88,000 (all taxable) before you dipped into your own capital, which is not taxed. (This is no bargain, since you've already paid tax on that money anyway).

There is one exception to this rule. If you annuitize -- that is, turn your balance into a stream of income as opposed to just pulling out the money sporadically -- then a portion of each of the payments you receive would be considered a return of capital.

So you would be taxed only on the portion that represents your gain. (This is a bargain, in that you effectively postpone the tax due on your gains.)

You should also be aware that you may take a hit on your withdrawals in other ways as well. If you pull out money before age 59 1/2, for example, you will also owe a 10 percent federal tax penalty on your gains on top of regular income taxes.

Most annuities also carry "surrender charges," or premature withdrawal penalties levied by insurers that can dock your withdrawals by as much as 10 percent. These surrender charges get smaller and eventually disappear, usually after seven to 10 years, but you should check to see if any still apply in your case.

All that said, do I recommend you withdraw the money? Well, if you're thinking of withdrawing it for safety considerations alone, I guess I don't see the rush given Acacia's current relatively high ratings. But that's your call.

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On the other hand, if it's a question of needing the money, well, I guess you need the money, in which case you have two choices: pull money out as you need it and pay the tax, or "annuitize" your balance into a stream of income that can last the rest of your life.

This is not an option to be taken lightly, though, because once you do this, you typically lose access to your principal. In other words, you trade your balance for the promise of the regular payments.

So before you embark on such a move, you might want to check out the pros and cons of annuitization by reading my Annuity Buyer's Guide, which originally appeared in the November 2002 issue of MONEY, but you can get by clicking here.

So I suggest you and your husband settle in and get comfy. You've got a bit of reading, and a lot of thinking to do.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He can be seen regularly Monday mornings at 7:40 am on CNNfn.