downisland: "My brother just bought a variable Annuity. The broker claims it has a 7% living guaranty which insures the annuity will grow at 7% per year regardless of how his mutual funds perform inside the annuity."I doubt it. Broker should be able to show the provision of the VA that issues this guaranty; my best guess, there is a short guarantee period.Also a quarterly ratchet feature that locks in the performance of his mutual funds- he can use it to lock-in to determine his income stream.I told my brother about a recent Kenneth Fisher article which said the only people who make money on annuities are the insurance companies issuing them. My brother claims that only applies to equity index annuities and that his is a variable annuity."Not correct."Ken Fisher pointed out that profits from annuitites are taxed as ordinary income instead of the 15% tax on capital gains and dividends. My brother claims he paid no fees for this product. It sounds too good to be true."He paid, one way or another."He must leave it for 10 years but they guarantee a minimum of 7% a year."What is he getting racked for fees and expenses during those 10 years?Here is a recent thread briefly discussing VA. http://boards.fool.com/Message.asp?mid=23093612 post 47754 on Ret. Inv. boardMost of the older discussions about VAs are on the insurance board.Regards, JAFO
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