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Greetings, J, and welcome. You wrote:

<<My parents are looking at a variable annuity with Putnam Allstate advisor they claim this is insured and even if the funds they pick go down at the end of the ten years Putman allstate will guarantee a compounded 6%. So they will get either the compounded 6% or market value whichever is more. I am aware of the high expenses associated with these types of investments along with surrender fees etc... my parents are on very limited resources and my gut tells me just to have them invest in a mutual fund... but what about the guarantee? Is this true? I must be missing something.. ??? and what about the life insurance part what downfalls are their?>>

Yes, the guarantee is true and is as safe as the company writing the contract. It also comes at a price. The real question to ask is whether a guaranteed 6% return over ten years is worth the price. Looking at the 50 rolling 10-year periods ending on December 31 since the one ending in 1950, you can see the market has failed to deliver that 6% return on but five occasions. Said another way, in the last 50 years the market has beaten that return nine out of ten times. Thus, is the guarantee worth the price it will cost?

For more on annuities, see our Annuity area at

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