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Greetings, foolrave, and welcome.

<<I have some questions about annuties to fellow fools.
Good Day Dear Fools,
1) annuties can be bought with after tax money but tax
on growth differed till we take out.
then why not invest all money for long term in annuties? what is the catch?
2) My broker advises buying lots of annuties and spread them in different mutual funds etc.
3) when we need the money say at 60 years ( iam now 43) can we get all the money back? or they will only
give some $ every month and keep all the capital.?
60 Years and pay capital gains as needed!!

4) Can we anyway invest in the FF-4 stock in any annuity?
5) annuity soounds too good(tax deferred growth and no limits to investment like IRA 2250 $ limit) to be true can anyone explain the -ve side to this.>>

No, you cannot invest in individual securities like the Foolish Four within an annuity. From your description, it sounds like your broker is trying to sucker you into buying a variable annuity of some type.

Around Fooldom we don't think too much of variable annuity/life products for a whole host of reasons. They may be appropriate in some instances, but for most people they are not.

IMHO, the cons to these products are that they have insurance expenses not involved with an ordinary investment. These fees on top of potential loads and transaction fees eat into possible returns. If you want out early or before age 59 1/2, either the product or the tax man or both may impose some fairly steep penalties for that early withdrawal. Unlike an ordinary investment, when you die your heirs don't enjoy a stepped-up cost basis on the underlying investment(s), hence they garner no income tax avoidance potential for those heirs. To truly make them worthwhile, one has to hold them at least ten years, but probably closer to twenty, before they would normally beat a comparable taxable investment.

On the other hand, they make sense IF you have maxed out your other tax deferred retirement investments like a 401k , to include an after-tax IRA; if you wish to avoid current taxes on investment earnings; and if you have sufficient cash assets so that you don't need to touch the investment for at least ten years.

BTW, the March 1998 issue of Financial Planning magazine (the official rag of the International Association of Financial Planning) had a listing of a hundred or so of these beasties by company showing the underlying investment accounts and returns for the past 1, 3, 5 and 10 year periods. Might be worth a trip to your nearest Business School college library for a review.

You need to look at the past performance of the VUL much as you would a mutual fund and be attentive to the level of charges, which include not only the usual mutual fund charges but also the insurers' risk charges that can run 1% a year and more. You should think through whether you need the product at all. Most people should not buy it unless they have a genuine need for the life insurance compotent of it, although some higher bracket customers may find it useful for pure investment reasons.

As one final thought, you just might ask your broker how much he/she will get out of the purchase. With a recommendation of a multiple purpose, methinks more than a genuine concern for your welfare is at work here.


Subject: IRA Withdrawls


<<Is there a place in The Fool, or someplace else on the net, where I can find the rules for withdrawls from a tax deferred IRA. I know 59.5 is the date the 10% penalty ends but are there other ages where something changes. Like what happens at 62.5 and at 65?>>

You know the 59 ½ rule, so the only other one your're missing is the one that says money in a traditional IRA must begin coming out by April 1 of the year following the year the owner turns age 70 ½. There is a required minimum distribution at that point, and failure to take it will result in a 50% penalty on the excess money left in the IRA in that year.

You'll find the rules for IRAs in IRS Pub 590, Individual Retirement Arrangements, which you may obtain at the following link:


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