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Hello,

Good question...I've been looking into this myself lately. A search of these message boards will tell you that variable annuities are not generally well thought of in Fooldom. However, when you're in the higher tax brackets, an opportunity to defer taxes may seem attractive.

Here are a couple of concerns I have:

1) Investment options are a short list of mutual funds, and as we all know, most underperform the market. I think Vanguard has the S&P500 Index Fund on their list, though.

2) Earnings are taxed as regular income when they come out - no capital gains treatment. It's hard to know what tax bracket you will be in when you withdraw the money.

3) If you never need the money, there is no stepped-up valuation upon your death.

Given these things, I'm leaning towards a portfolio of a few solid long term stocks that pay little or no dividends.

What does anyone else think?

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