saluki9 said:
If you're young, in a high tax bracket, and save a large % of your income then a low cost variable annuity may be of use to you.
If you're already maxing out your 401(k), Roth, etc and have extra money that you aren't going to need for a long time then it can be a good place for your REITs and other hight income investments.
I have never believed the above arguments.
First if you are in a high tax bracket, you ain't eligible for a Roth.
Second, you can invest in a tax-managed way for the long term outside of a variable annuity. The benefits of that are
(a) tax-deferral, just like in a variable annuity
(b) no additional expenses like the 0.25% mentioned or the variable annuity average expense of 2.4%
(c) no early withdrawal penalty
(d) no restrictions on when you can withdraw, no waiting to old age to withdraw
(e) on withdrawals, you pay long term capital gains tax on realized gains, not the higher marginal income tax rate.
(f) if you die, your heirs get your gains free of tax, instead of having to pay income tax on your gains.
In the disclosure of assets in the last Presidential elections, I don't recall variable annuities being used by the candidates to shelter income. I do reall lots of tax-exempt bonds though.
Now that I wrote all the above, I must also write that I have a variable annuity. It is the only way I could participate in my 403(b) plan.
We can use our 401(k)s and 403(b) (and their follow-on rollover IRAs) to "shelter" income investments like a REIT fund, commodities, and fixed income. There is no need to invoke a variable annuity for that purpose.