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The problems with the variable annuity is the high expense. If you look in the "Money and Investing" section of any Monday edition of the Wall Street Journal, you'll find a listing of many variable annuities and their expense. These expenses range from 1.50% to 2.75% which really take a bite out of your principal. For example, a 2.00% expense ratio with $300,000 invested, will cost you somewhere in the vicinity of $30,000 after five years. TIAA-CREF has much lower expense ratios, but then its fund's performances have not been what I would call satisfactory.

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