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KcofMaine writes:

I am still in the accumulation stages, having just turned 50, for my retirement in 15 or 20 years. I will soon be receiving some moneys, nonqualified and already taxed. These moneys are to be set aside for our retirement years. We are already maxing out, my wife and I, on our IRAs. It looks to me as though I have three choices, and I am interested in thoughtful opinions on the best alternatives. (I am ruling out a deferred fixed annuity...for either now or in retirement years).

1. Variable annuity with good aggressive fund choices, such as is available with Sun America and with American Skandia. Principle advantage is deferred tax growth on dollars that cannot be in an otherwise tax-advantaged vehicle (such as IRA, 401k, SEP, etc.). Principle disadvantage...are fees and insurance mortality expenses.

2. Direct stock purchases with these funds. Principle bogus expenses taken out by fund managers and insurance companies. Principle disadvantage...must pay taxes annually on dividends.

3. Purchase undeveloped land here in Maine for future woodlot sale. Keep it undeveloped to maintain low tax bill on the property to local town. Principle advantage--no income or capital gains taxes until property is sold. Principle disadvantage--property taxes must be paid annually & lawmakers may pass legislation that wipe out the potential of the property as a wood lot.

Any sage wisdom out there by folks who have been there and done that?? Or from others like me who are lurking here hoping to gain some insight??

Looks like you've given this matter a great deal of thought. You've outlined your options quite well. If you want the tax break on current earnings, the case for annuities is strong. Nevertheless, I think growth stocks with low dividends will result in a bigger pot in the long run. Thus, if growth is important, I'd opt for Door Number Two. Door Three is out for me because I distrust raw land as a true growth vehicle. As you noted, zoning laws can change too easily. Also, the speculative bubble can burst much more quickly there, too. So given the same choices and in the absence of compelling tax reasons to do otherwise, I would prefer option 2. Just one Fool's opinion FWIW, and that can't be much considering what you paid for it.


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