I believe I could choose from most stocks, bonds, and mutual funds to invest the annuity funds.I'm not up to date on what is available now, but traditionally, variable annuities allow you to select from several investment portfolios. Hence, they are much like mutual funds except for the tax advantages and the extra fees. I am not aware of any self directed annuities that allow you to pick your own stocks and bonds, but perhaps that is something new. Fidelity will tell you what they offer I am sure. Taxable money would be used to fund an annuity but withdrawals are tax free, is that correct?The way it usually works is like with an IRA. Part of each distribution from the account is treated as a return of the money you invested. So much depends on how much accumulated investment earnings you have in the account. If your returns are good, the distribution is mostly taxable; if returns are modest, its mostly return of your investment. The gains are taxed at ordinary income tax rates.
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