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Subject:  Re: Annuities = Bad Choice For All? Date:  4/17/2008  6:42 PM
Author:  Hubris Number:  62285 of 90137

I received a Fool email today about "Those Lying Annuity Salesmen". My question is regarding the annuity product (or similar products from others) from Prudential "Highest Daily Lifetime Seven". This one appears to have a guaranteed minimum earnings rate of 7%

I haven't read the Fool email and I don't know anything about that specific annuity product but I will make a couple comments. An annuity is just a structure, there's nothing intrinsically evil about it and some type of annuity may be a good choice for some investors. That said, there are several potential pitfalls. There may be a sales load (commission) and high annual fees involved. You never want to pay a sales load, and you want to pay as little in fees as you can. The annuity will restrict you to specific choices of investments,and these may be bad and carry their own loads and fees. You need to look closely at what the annuity will let you invest in. And the more complicated structure of some annuities may make it hard for the investor to see what they are actually getting. Before you get involved with anything, read the actual prospectus closely and make sure you understand everything in it.

Other comments unrelated to annuities... Nobody can guarantee you an above market return at minimum risk. If someone promises that I pretty much stop reading right there, it's a sales pitch aimed at people who are more optimistic than experienced. And, as much as it pains me to say it, be careful with some of the Fool advice. Some things, especially aimed at less experienced investors, is spot-on "pay down your credit card debt" or "invest in no load, low annual fee index funds", but some of their specific advice is less consistent and I'd definitely run it by other people on the boards, as you are doing here.

Hope this helps,

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