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Author: wrcad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: variable annuities Date: 6/12/1999 6:31 PM
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My understanding of variable annuities is this:

(1) They are essentially mutual funds in a tax-deferred wrapper, like IRA's and 401(k)'s.

(2) Unlike IRA's and 401(k)'s, there is no tax deduction for contributions. But gains, dividends, interest, etc. accumulate tax free, just like with IRA's and 401(k)'s.

(3) They are designed as retirement vehicles, so there are penalties (definitely tax penalties and maybe penalties imposed by the company too) for early withdrawal.

(4) Distributions are taxed at ordinary, not cap. gains, rates.

(5) The big knock on them is the high fees charged by the ins. co.

Assuming I'm right so far, here's my question: Are there limits (i.e. imposed by IRS) on the maximum amount that can be sheltered thru a variable annuity? I know that there are limits on IRA's and 401(k)'s ($2000 and ~$10000 yearly), so I'm wondering if the same ideas apply here.

Thanks.
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