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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75402  
Subject: Re: eAnnuity Date: 10/27/1999 2:32 PM
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Helter, you asked:

<< 2. What is conventional wisdom about when an Annuity is a smart investment - if you are in a high tax bracket? >>


One would want to consider an Annuity if one has used any available other tax shelters (401(k)s, IRA's, etc.) AND is looking for additional place for tax deferral.

<< 3. How complex is annuity ownership - how does this effect your tax returns/etc... >>


Annuity "OWNERSHIP" is not particularly complex. But searching and selecting an annuity IS. This is because there are several "kinds" of annuities and then there are about as many different designs of each kind as there are annuities. Selecting an annuity is NOT a "do-it-yourself" project which flies in the face of Motley Fool approach to things.

While one can realize a great advantage for compounding inside of a tax deferred environment, one has to weigh this again the fact that earnings that come out of an annuity will AWAYS be income taxable . .. whether to you, the annuity owner, or to the beneficiary.

The fact that ordinary income tax has to be paid by a beneficiary also, means that an annuity is best used FIRST during retirement as you want to use it and not have it go to a beneficiary.

Also, annuities are also subject to estate taxes making them double taxed . . .a strong reason for making sure one uses them . .. .not letting the annuity proceeds go to a beneficiary.

BTW: these are the same problems one has with SEPs, IRAs, 401(k) and other qualified plans.


<< On a personal note - my situation is as follows:
27 years old, max tax bracket(over 200k/year earnings) - no home - no deductions.
Have a SEP IRA started this year(self-employed), have old 401k's from old jobs. Have some MF's that I've been dollar cost averaging into for 5 years or so. Have individual stocks in taxable and SEP-IRA. I've been thinking of adding some index funds to the mix - is this annuity a smart place to do that for someone in my situation? I expect to earn at this rate for the next 2 or 3 years after which I expect to return to a more modest 70 to 80k/year. I have no plans to buy a house - I travel and relocate regularly.>>


You're seeking FREE advise and here, you'll probably get advise that is worth just about what you're paying. The best thing you could do is seek out a good experience financial planner to go over this with you . . . in DETAIL. Sure, it'll cost you something (you can afford it now), but the benefit will very likely far outweigh that cost. It sounds like you're doing fine in a lot of way . . . . but may need to things more efficiently and effectively . . . ??? A good experience financial planner has the knowledge, training and experience to help you do that.
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