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Author: 2old4bs 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 75626  
Subject: Re: Equity Indexed Annuity Date: 2/10/2004 5:30 PM
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The only people who should consider annuities are those unable or unwillng to manage their money, and want 'monthly income for life' from a lump sum payment (cash value pension , or separation pay, or whatever). They will pay a few percent a year in fees for that privilege.

Usually I agree with telegraph, but not in this case. I own an annuity, so perhaps I'm taking those unable or unwilling to manage their money personally ;-)

I am both able and willing to manage my money. I am single, in a very high tax bracket and will be for many years to come. I can't contribute to a Roth (way over the limit), and already max out my 401K. I need a vehicle in which I can defer taxes because in retirement I will be in a MUCH lower tax bracket. So, I make a non-deductible contribution to a traditional IRA each year. I also contribute to my annuity, as well as to a 'taxable' account. Since tax laws are always changing, I'm not willing to put all my eggs into one retirement basket. Doing so with a 'taxable' account might at some point in the future trigger the AMT (as another poster pointed out). Unlike 401K money which all comes out at ordinary income rates, TIRA's to which non-deductible contributions have been made, and annuity payouts will at least be partially non-taxable.

My variable annuity is fairly cheap compared to those sold by 'financial advisors' and there are no surrender fees. I pay less than one point/year for the privilege, and I have a decent choice of investment vehicles within it (much better than my 401K which is stacked with loaded funds!).

I guess I just want to point out that broad-stroke generalizations can sometimes be inaccurate for any particular case.

2old


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