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We see that brokerage firms are still putting IRA's and 401(k) retirement money into variable annuities. This is a surprise and a waste in most cases, because there is no need to pay for double tax advantages, when the retirement plan already provides for tax advantages. There is no benefit to again having a tax advantage. Even the SEC proclaims on its site, CAUTION for putting variable annuities inside of IRA or 401(k) accounts. The SEC says:
Caution!Other investment vehicles, such as IRAs and employer-sponsored 401(k) plans, also may provide you with tax-deferred growth and other tax advantages. For most investors, it will be advantageous to make the maximum allowable contributions to IRAs and 401(k) plans before investing in a variable annuity. In addition, if you are investing in a variable annuity through a tax-advantaged retirement plan (such as a 401(k) plan or IRA), you will get no additional tax advantage from the variable annuity. Under these circumstances, consider buying a variable annuity only if it makes sense because of the annuity's other features, such as lifetime income payments and death benefit protection. The tax rules that apply to variable annuities can be complicated – before investing, you may want to consult a tax adviser about the tax consequences to you of investing in a variable annuity. |
You can see this on the SEC's own website at http://www.sec.gov/investor/pubs/varannty.htm at Investor Tips, what you should know.
Many significant cases which we have handled, and which have been in the news lately, have been where investors--especially groups who worked at one place--were led into buying variable annuity investments. The variable annuity investments were placed inside of the investors retirement accounts--either IRAs or 401(k)s-- causing the investors to lose even more money. It is a real sad thing to see and hear about, and we hear it every day.
