Still, we know nothing about the risk tolerance (or the investment experience) of the purchaser.Also, if the client needs income from their investment, then they will not likely have an increase in their value of their principle anyway (so inflation risk is not resolved by simply buying an income mutual fund). And yes, 6% is still 6%...If you buy a bond fund that yield 6%, you still have to be concerned about inflation risk, and interest rate risk. Two years later, if rates are low and as the bonds mature, your fund could now be yielding only 5%.In contrast, while you have higher expenses, they are not an issue as it relates to your income stream. You have no interest rate risk and your inflation risk is relatively the same.Again, a VA is not for everyone, but neither is a go-it-alone mutual fund. I see clients every month that tried it on their own and lost much of their life savings. Telling them they saved money with a no-load fund that had little or no 12b-1 fees is of little comfort to them.
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