When you look at that number, if it says net of expenses, then that is what
you get. Sleazy investments often will put a return that looks wonderful,
but then, in very fine print, it 'll note it doesn't include expenses.

The Allianz number is net of expenses.

"Winter" <downeaster1000[at]yahoo.com> wrote in message
news:1109937061.047656.103390[at]z14g2000cwz.googlegroups.com...
- quote -

A variable
- quote -


Surrender fees are obviously a factor if one surrenders but beyond that
what is there that prevents the stated rate of return from reaching my
pocket (not talking about management fees that were calculated before
arriving at the net return) I dont know. I am just asking.

For example, and I know this is basic, if Allianz states in one of its
brochures that a certain annuity achieved an average yield of 6.6% over
the last ten years, how much of that 6.6% is going to be issued
directly to me. Is it 6.6% or is there some batman decoder ring that I
have to use to deduct some other charges.

Winter

BreadWithSpam[at]fractious.net wrote:
- quote -

accurate. Not everyone can buy insurance. It's not the same thing as
buying a toaster. One must qualify for any coverage first, so
technically, no one actually "buys" insurance. But assuming for the
moment that this terminology was appropriate, those who have HIV/AIDS
cannot buy insurance. Those who have a terminal illness cannot buy
insurance. Those who have high blood pressure or diabetes that is not
controlled cannot buy insurance. Those who are 5'8" and 320 pounds
cannot buy insurance. Those who have a recent DUI cannot buy
insurance. Those who travel to high risk countries such as Israel
cannot buy insurance. Those who have suffered a heart attack, suffered
a stroke, developed cancer or any of a number of serious health
conditions in the recent past cannot buy insurance. Some people, in
fact are uninsurable from birth (e.g., those with sickle cell anemia).
However, all of the above and in fact anyone in general can buy an
annuity contract that provides death benefit guarantees. Yes, you must
pay for those guarantees. But I'm sure a lot of people who had mutual
fund holdings in 2000 and saw their account values susequently plummet
now in hindsight would have gladly paid for those guarantees and locked
in those gains by buying an annuity contract with a highest contract
anniversary value feature. If you had mutual find holdings of $100,000
in March 2000 and 2-3 years later your acount value dwindled down to
$50,000, how much money would you pay to have your account value
restored to the original $100,000?


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I disagree. You can have the same investment objective and and
use either mutual funds or an annuity as the vehicle used to accomplish
that objective. The difference is one of risk to reward. Mutual funds
(or individual securities for that matter) provide a higher potential
reward than a variable annuity in which the funds are invested in the
subaccount equivalents of those same mutual funds all else being equal.
However, the trade-off is that in exchange for this higher potential
return, one must accept a higher level of risk given that the principal
invested in any mutual fund is at risk and not guaranteed. A variable
annuity has greater fees, which will dampen potential return, but in
return those fees provide a safety net that guarantees among other
things that if the market goes south, the investor cannot lose more than
the original principal. In fact, with living benefits on contracts
these days, the guaranteed base can increase over time either by locking
in realized gains or through a guaranteed minimum interest rate. Thus,
the investor accepts lower potential returns in exchange for lower risk.
It's not so much an issue of whether one type of vehicle is better
than the other but rather one of any one individual's personal risk
tolerance. Think of it this way. A annuity contract can be thought of
as an insurance policy in which you are insuring a sum of money against
an unforseen loss and the fees that pay for the guarantees offered by
the annuity represent your premiums. Some people are not willing to
risk their principal and therefore want to insure it, whereas some
people do not and are willing to accept that risk.

"BMS" <mcfarland[at]yahoo.com> writes:

- quote -

*Realized* gains from the sale of mutual funds are taxed
at one's cap-gains rate - long-term cap-gains rate is 15%.
Distributions from a fund (frequently reinvested) are
taxed at several different rates - short, long cap-gains,
dividends - many of which, again max out at 15%.

Many many mutual funds are run in a tax-efficient manner -
holding on to unrealized gains and offsetting realized
gains with losses. (or, like index funds, typically not
realizing much in the way of gains *or* losses through
very low turnover).

- quote -

Mutual funds (or any brokerage asset) may have a designated
beneficiary. It doesn't avoid probate, but, so what?

- quote -

Depends on the state. Same with IRA and 401k assets.

- quote -

Anyone may buy insurance. It's not like that death benefit
comes for free. One pays for it, one way or another.

- quote -

huh?

- quote -

Very arguable. "always"? Try, at best, "may".

- quote -

Only if that fund is going to have a large distribution.
See above with respect to well-run tax efficient funds.

- quote -

That's crap. Annuities are better *for certain purposes*.
And mutual funds (or other direct asset ownership) is better
*for other purposes*. You are comparing apples and oranges
and doing so makes no sense.

- quote -

Again, apples and oranges.

Look, there are plenty of great reasons for certain folks
to buy annuities. Comparing them to mutual funds without
the context of an individual's needs and how these products
fits those needs doesn't help the case in the slightest.

It's roughly like arguing that a pickup-truck is better
than a sedan. One's not better than the other. One's
*different* from the other and both have advantages in
different context because they are different vehicles
with different primary purposes.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

BMS wrote:
- quote -

Long term capital gains and qualified dividends are taxed at a 15% rate
or lower. The gains from a variable annuity are taxed as ordinary
income, at a rate of up to 35%, at withdrawal.

- quote -

How? For mutual funds and stocks, up to $3000 of capital losses not
offset by capital gains can be deducted from orndinary income each
year.

- quote -

"Always" is doubtful. It depends on the expenses of the variable
annuity and the comparable mutual fund, the skills of the investment
managers, and other factors. I think fixed immediate annuities (FIA) do
make sense for some people, especially if the periodic payments are
indexed to inflation or grow at 2-3% rate. To accumulate the capital to
purchase an FIA, it may be better to accumulate money in 401(k)s and
then taxable accounts rather than tax-deferred variable annuities. The
choice of variable annuities vs. taxable account depends in part on how
the money will be invested. Money intended for REITs or junk bonds may
benefit from being in a variable annuity due to tax deferral and the
ordinary income tax rates assessed in a taxable account. With the
current favorable treatment of dividends and long term capital gains,
it is more difficult to make the case for owning stock funds in a
variable annuity, although the insurance benefit still has value.

- quote -


I think exchange-traded funds also avoid this tax trap.

- quote -


I read many finance journals and do not recall such studies. Can you
provide a reference?

- quote -

If VA's do not take steps against investors trying to profit from stale
net asset values, long term investors are hurt. Reasonable redemption
fees may not be a problem if they are paid to the fund, rather than the
management company.

- quote -

I own stocks and funds through Fidelity and have not found this to be
the case.

1.. Gains from mutual funds are taxed annually at rates exceeding
20%, while variable annuity withdrawals are taxed at rates that rarely
exceed 20%.


2.. Variable annuities can be switched for different annuities
within the same annuity company or exchanged for a different annuity without
incurring tax consequences.


3.. Mutual fund ownership, unlike variable annuity ownership, may
result in a reduction of loss of college financial aid.


4.. Mutual fund ownership, unlike variable annuity ownership, may
disqualify the owner from Medicaid assistance.


5.. Variable annuities are non-probate property. Attempts to
convert mutual funds into non-probate property can be problematic.


6.. Variable annuities are protected from creditors in many cases
where mutual funds are not.


7.. Variable annuities provide a death benefit unavailable to mutual
fund holders.


8.. If capital gains rates or holding periods are increased,
variable annuity owners will benefit while mutual fund owners will be
penalized.


9.. Many variable annuities allow dollar cost averaging, which
includes paying from 8% to 10% on funds awaiting investment. Mutual funds
do not provide this advantage.


10.. The tax treatment for losses taken on variable annuities is
more beneficial than with mutual funds.


11.. Annuitization of a variable annuity for retirement income or
estate planning will always provide more after-tax benefit than an equal
sized portfolio of mutual funds.


12.. The distribution reporting requirements of mutual funds
effectively precludes purchasing mutual funds late in the year. Variable
annuities can be purchased any time during the year without negative tax
consequences.


13.. Redemptions by some mutual fund owners can force non-redeeming
owners to pay increased income taxes on "imbedded gains," even when the fund
involved is losing money. Variable annuities present no similar tax trap.


14.. Unlike variable annuity ownership, mutual fund ownership may
cause a significant reduction in an owner's tax deductions, credits and/or
exemptions, which in turn may result in increased income taxes.


15.. Mutual fund ownership, unlike variable annuity ownership, may
negatively impact other retirement benefits.


16.. In-depth academic and industry studies clearly demonstrate that
variable annuities are better long-term investments than mutual funds.


17.. Mutual funds, unlike variable annuities, are beginning to
restrict when investors can sell or exchange their funds or are imposing
hefty redemption fees when sales do occur.


18.. The record-keeping requirement for mutual fund owners, unlike
variable annuity owners, is onerous.


19.. Many variable annuity issuers, unlike mutual fund companies,
offer valuable living benefits to purchasers of their variable annuities.


20.. Variable annuities, unlike mutual funds, provide purchasers
with a no-risk revocation or free-look period when buying a variable
annuity.

lon wrote:
- quote -

Lon,

For an unbiased discussion of variable annuities, go to:

http://www.sec.gov/investor/pubs/varannty.htm

For most people annuities are a very costly investment. Variable
annuities have multiple fee layers (surrender charges, separate
account/mortality charges, and fund charges) that can eat away 2-5% of
your investment--annually. Most people would be better off steering
clear of annuities and fully funding their IRAs, ROTH or traditional.

If you must invest in an annuity, check out Vanguard, which offers low
fees, no surrender charges, and good fund options.

Tom B.

Can anyone point me to a comparison of fixed verses variable annuities.
Thanks in advance