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Author: ZIP666 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76395  
Subject: Annuity vs. Mutual....? Date: 7/8/1999 12:48 PM
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I received a Fidelity equity income annuity fund when my dad passed away recently, and am wondering what the benefits are, as opposed to, say, an index fund. I'm 32 and this is my first investment; I have no other assets to speak of. Any suggestions?
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11838 of 76395
Subject: Re: Annuity vs. Mutual....? Date: 7/8/1999 3:55 PM
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Greetings, ZIP666, and welcome. You wrote:

<<I received a Fidelity equity income annuity fund when my dad passed away recently, and am wondering what the benefits are, as opposed to, say, an index fund. I'm 32 and this is my first investment; I have no other assets to speak of. Any suggestions? >>

I'm confused. Did you inherit an annuity that was invested in Fidelity Equity Income Fund or did you inherit the fund itself? In any event, you can track the record of that fund both at Fidelity's website and at www.morningstar.net. The latter will also allow you to compare it against something like the Vanguard 500 Index Portfolio fund.

Regards..Pixy

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Author: ZIP666 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11841 of 76395
Subject: Re: Annuity vs. Mutual....? Date: 7/8/1999 4:15 PM
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I was confused myself - I thought I inherited the fund, but found out it was the annuity invested in the fund - thus leading me to explore options. I have to remove all monies within 5 years, and would rather do it now, if I can score a higher return. I'll see what I can glean from Morningstar. Thanks a lot -
Keith

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Author: Bobbcat Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11847 of 76395
Subject: Re: Annuity vs. Mutual....? Date: 7/8/1999 6:52 PM
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Now I'm confused...

<<I have to remove all monies within 5 years ....>>

If the annuity was an IRA and you are the beneficiary of the IRA, then there is a 2nd rule you can take advantage of. Although you indicate you want to take the money immediately to score bigger returns, look at this rule and think about the effect of income growing tax deferred. Also, see if you can find a broker or Trust department willing to accept an Inherited IRA. That way you can buy any assets you want and have the advantages listed below. (Have your cake and eat it too)

2nd rule:
If you start taking distributions by December 31 of the year following death, you have the right to spread the distributions "at least as fast" as the life expectancy of the eldest beneficiary. That means you can take more if you want, just not less.

For a large IRA with a beneficiary with a 30 year life expectancy, this can mean spreading the distributions over 30 years rather than 5. Reducing the tax bite and, more importantly, increasing the number of years of tax deferred growth of the account.

So, if the IRA Owner died January 1, 1999 - December 31, 1999 the beneficiary(s) have until December 31, 2000 to make the decision and take the first distribution. If the first distribution is after Dec. 2000, then all monies have to be distributed within 5 years of death.

Also, as long as you're taking the dollars out of an Inherited IRA, you qualify for one of the few 10% penalty exceptions even if you're under 59 1/2 years old.


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