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<<variable annuities aren't limited to low risk investments - many offer a much wider variety of subaccounts that include index funds, large, mid, and small cap funds, and global funds in addition to bond funds and fixed-interest accounts...>>

WSJ has an article today on the underperformance of annuity based index funds. Well worth reading. Peppermintpatty is in the insurance business, this seems to be the case for most advocates of annuities.

Also, a 20% hit from capital gains taxes will be recovered in 5.1 years if you switch from a fund lagging the market by 5%/year to one matching the market. After that time you are progressively further ahead.

(assumption market return 15%, lagging fund 10%; time to equal performance is less if you assume a market return more like the 10% or so historical norm.)
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