what are main pitfalls in buying a deferred variable annuity?

Answer 1

The main downside is the expense. My company sells annuitiues and charges like 1.3% of the assets each year. That may not sound like much but if you invested $100,000 and were earning 7% per year (before charges) you would have 542,743.26 after 25 years oitside an annuity but if you do that inside the annuity you end up with 399,829.36 after 25 years which is 142,913.90 less. You would have to leave you money invested for more than 5 extra years to catch back up to where you would habve been after 25 years outside an annuity.

Answer 2

The main pitfall is that it underperforms almost anything else you could do, besides putting it in your checking account.

Here’s a simple, three-fund portfolio consisting of low-cost ETF’s that is likely to outperform anything your stock broker throws at you over the next 10 years.

Vanguard's Total Stock Market ETF – VTI – total market
iShares International MSCI EAFE value fund – EFV – value fund
iShares Lehman Aggregate Bond Fund – AGG – aggregate bond fund

Unified Theory of Everything Financial
Revealed in Dilbert and the Way of the Weasels
By Scott Adams

1.Make a will
2.Pay off your credit cards
3.Get term life insurance if you have a family to support
4.Fund your 401k to the maximum
5.Fund your IRA to the maximum
6.Buy a house if you want to live in a house and can afford it
7.Put six months worth of expenses in a money-market account
8.Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
9.If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Check the bottom line: A portfolio with an asset allocation of 70% in Vanguard's Total Stock Market Index (VTSMX) is doing just fine, performing remarkably close to the S&P 500 index. Moreover, that simple two-fund portfolio is perfect for the vast majority of America's 95 million investors who are passive much as Adam's Dilbert character.
The truth is, most investors have little or no interest in Wall Street's casino action; all the time-consuming research, the sophisticated stock-picking tricks, the costly trading necessary to play in a market drowning in 10,000 stocks, 18,000 funds and more than 100,000 bonds. Most investors have jobs and kids as their top priority. Moreover, Dilbert's simple two-fund portfolio compares favorably with our other lazy portfolios.

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Answer 3

The main pitfall I suppose would be the fact that it's tied to investments. Do you have enough time to ride out lows in the stock market? If so it's not really bad. Of course you have to factor in costs for whatever investment company you use. If you want more info contact me.