Date: Thu, 12 Oct 2006 10:22:22 -0500
From: "rick++" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Variable Annuities
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> 2) Most annuities have surrender fees, starting at 10% the first year,
> declining over a ten year period.
OUTDATED.
>
> 3) The initial fee to the seller is likely near 5%.
OUTDATED.
>
> 4) The gains on the annuity do not get stepped up basis on your death,
> it's just like inheriting an IRA.
GOOD POINT.
>
> 5) The investment choices within the annuity are limited.
JUST LIKE MOST 401KS
>
> 6) The gains at withdrawal are taxed at ordinary income rates, while an
> investment in a taxable account are taxed at favorable dividend and long
> term cap gain rates.
TRUE.  However if one is investing in ones 30s for income in ones 80s,
there arent many stocks that will turn into dogs in the meantime that
you'll
have to sell early, take gains and pay taxes.  Plus gains were taxed
same
as income until 1978 and from 1986 to 1994 and may again.
>
> 7) Even if you choose a no-surrender fee, low cost, fund (say one
> offered by Fidelity), the effect of (6) above negates any tax deferral
> advantage over time.
See explanation for 6.

A VA or EIA might be viable for a late saver or a high income saver
where
current deferred amounts are too paltry.   I wouldn't put more than a
fraction
of ones savings solely in one investment vehicle because tax laws and
economic conditions change with time, especially over decades.  So a VA
could be a 20% solution for some people, but not a 50% or 100%.
I am very pleased with the tax deferrals in received in one of the
these
"almost free" VAs in the current four year bull market.