Date: Sun, 18 Jan 2004 10:29:02 CST
From: "Nashville Pete" 
References:  <64f08a22.0401180612.72d711cb@posting.google.com>
Subject: Re:  need help with variable annuity decision
Newsgroups: misc.invest.financial-plan
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	3JzLXMiuksdcbWE5hvbGa0vqmP1/v3Nz3j7deKXtdQIDzo2WVtR3lQ==
	=9Vu/

I think you are right on track. I am not a professional, just a BSEE with an
MBA and a 63 year old retired investor for 9 years. And I'm never too old to
learn. I do the same for bond investments but I hadn't considered REIT's,
thanks!


"matt noone"  wrote in message
news:64f08a22.0401180612.72d711cb@posting.google.com...
> While it is true that the reduction in capital gains taxes has
> increased even further the payback period for variable annuity
> investments holding stocks, I believe it has had no impact on variable
> annuity investments holding Reits and Bonds, since profits from these
> investments are treated as ordinary income, not capital gains.
>
> It seems to me that using variable annuities to invest in Bonds and
> Reits is a far superior alternative than using taxable accounts to
> invest in these areas, because of the tax deferral aspect.  If a bond
> fund returns 6% in a taxable account, my actual after tax return will
> be a shade-over 4% due to a 31% combined state and federal income tax
> rate.  However, in an annuity, I don't have to pay income tax until I
> begin my withdrawals, some twenty years from now.  So I have a 6%
> return compounded annually for twenty years with a variable annuity,
> vs. a 4% return compounded annually.  This spread can obviously add up
> to big differences in the long run.  Moreover, when I actually begin
> drawing down on the annuity in 20 some odd years, I will be retired
> and likely in a lower tax bracket.
>
> Based upon this, I am considering investing in a Vanguard Variable
> Annuity.  I want to invest in the Vanguard Annuity because its fees
> are rock-bottom vs. other annuities, and their bond fund returns are
> always the best due to their low fees.  Of course the only alternative
> within the Reit category is a Reit index and there is a possibility
> that a well managed actively traded Reit fund can beat the Reit Index.
>  However, once the tax implications are considered, the
> actively-managed fund would need to return 30% better than the Index
> before it would be a better investment alternative than a tax-deferred
> real estate index fund.  I doubt even the best actively-managed Reit
> fund can do this consistently for twenty years.
>
> The money I am looking to invest would probably be only between $5,000
> to $15,000 a year for the next ten years.  There may even be years
> where I invest nothing, particularly in years where I don't get a
> bonus.  In year 10 my mortgage will be paid off, and I will likely
> increase the annual annuity investments by about $8000, about half of
> my current principal and interest mortgage payments.  I have maxed out
> my Keough, my 401k, both my and my wife's IRA's, and have no other
> tax-deferred means of investing available to me, other than whole life
> which I'm not interested in at this time.  I do not anticipate ever
> having a need to withdraw this money before age 59 1/2, about nineteen
> years from now.  So I think that I should open a Vanguard Annuity.  I
> only have a JD and an MBA, so I would like to hear what you financial
> professionals out there think about this plan.  First, should I use
> the variable annuity to invest in Reits and Bond funds.  Second, do
> you feel there is a better alternative than Vanguard?  Third, is there
> some other investment option which I should consider to increase my
> exposure in Bonds and Reits?
>
> There is one wild-card in this strategy--Lifetime Savings Accounts.
> If these ever come into being, I think they will be a better
> investment vehicle for Reits and Bonds than the variable annuity.  I
> have heard rumblings that Bush is going to propose them again this
> year.  What do you think the likelihood of them passing is?  Should I
> wait until the end of the year to invest in the annuity on the chance
> that the LSA is passed?
>
>
>
> 30% the profits from that taxa alternative is Index I think a well
> managed y are the premier bond fund investors
>
> Here's what I am considering , so I , get the full 6%   profit will I
> the income .  A 6 investing in are a far superior altn excellent
> vehicle for investing in Bonds and Reits.  You get tax defferal
>



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