Thumbs Down: VAs Panned Off

Physician's Money Digest, January31 2005, Volume 12, Issue 2

Tip:

Despite growing evidence thatvariable annuities (VAs) aren'tthe great investment that many insuranceagents say they are, sales of VAscontinue to grow. In the second quarterof 2004, sales topped $33 billion,up 1.5% from the previous year.Among the many drawbacks of VAsthat financial gurus point to are stiffsurrender fees that make it hard forinvestors to get at their cash. This canpaint a grim financial picture forsenior citizens, who are very oftenthe target of high-pressure VA salespitches. Also, money that comes outof a VA is taxed at ordinary tax ratesrather than the more favorable long-termcapital gains rate, which canwipe out any tax advantages for theVA. Consider a VA only afteryou've maxed out other retirementplans, like IRAs and 401(k)s.