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Five years ago I inherited $250,000 when my father passed away. His accounts were at Merrill Lynch, and not knowing a thing about investing at the time, I decided to follow in Dad's footsteps and just leave the money there.


The broker set me up in a Variable Annuity (VA), two IRA's (one for me and one for my wife), and several mutual funds.

After comparing my overall returns for the last five years with the S&P 500's (16.15%), I have discovered that my account lagged behind at about half that rate!! And now, after paying off some debt, the account balance now stands at about $275,000.

I am a Registered Fool as of this week, and things are going to to different BEGINNING NOW!

These are retirement funds, and I would like to retire in 10 years or when the account balance reaches $2,000,000 whichever comes first.

(Let's see....Using the Rule of 72 and a 20% annual compounded interest rate, the money should double every 3.6 years. So, starting with $275,000, if it doubles once--$550,000--twice--$1,100,000--thrice--$2,200,000. And, 3 X 3.6 = 10.8 years. Wow, we're in pretty good shape with the time and money! The only thing that remains is consistently getting the interest rate, and to a Fool that should be no problem, right?)

OK, this is what I need to know now:

1) What to do with the VA? Bite the bullet, pay the tax and penalties ($8000), and make it up with higher returns investing Foolishly? OR, do a 1035 exchange and transfer it to another Annuity with better subaccounts, i.e. mutual funds?

2) How would a Fool allocate this chunk of change among the various ways to Foolishly invest?

Your thoughts would be greatly appreciated.
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