I didn't see any mention of Vanguard variable annuities here. Here is my story.
For reasons not worth going into I invested (bought?) a Vanguard VA in 1994, at age 42. I'm not sure I realized it at the time, but this was an arrangement between Transamerica and Vanguard - the annuity contract was with Transamerica. It used Vanguard funds for investment ("sub-accounts") and Vanguard managed the investments - meaning, that if you called with a question Vanguard answered the phone. The Vanguard "front-office" component of this changed a few years ago when Vanguard gave up the "front-end" job and Transamerica took it over. Today the only connection with Vanguard is that the investments are still all Vanguard funds. (Boy did this piss off a lot of people, including me).
As I said I invested $50,000 in this VA in 1994 - almost exactly 30 years ago. I have kept the investments roughly 60/40, and I've rebalanced.
Today I'm 72 and the VA is worth $500,000, or 10X growth. My rule of thumb is to expect 7% nominal from a 60/40 portfolio, so in 30 years I would have expected the $50K to double three times - 100K, 200K, $400K. In fact, I've done better than that - a hair under 8% according to GPT4.
Today that $500K represents a little under 10% of my investments, and about 7.5% of net worth.
Was this a good investment? I'm still not sure.
As it turns out, I don't think my wife and I will ever need it, in part because it is tax-inefficient. Any money that comes out of it comes out as ordinary income, and the $50,000 "basis" comes out tax free, but last. So, we are just letting it ride.
Our present intention is to leave it to our daughter. In this light was this a good investment? It might be - she can "annuitize" it for lifetime income at a pretty good rate (depending on her age when she inherits). Or, she can let the investment continue and take money based on her RMD schedule (plus additional monies above that, at her discretion, if she chooses). Of course, she'll end up paying the ordinary income taxes.
So, while no one will really know for many years (I hope), and I will never know, this may turn out to be a good investment - for her.
I'd appreciate comments and observations on this. Am I missing anything?
(edit: Follow-up: Ive tried to find someone with a similar contract and situation on Bogleheads, with no luck, just to discuss whether my planning makes sense. I've also looked for a financial advisor to help me (and in the future my daughter) think through the choices we are making and that she will have to make when she inherits this VA (it's complicated), again with no luck. If readers here see a problem with my plans for this VA, I'd value your thoughts. And yes, I know if I'd put this in the S&P 500 for the last 30 years it would be worth a lot more, and our daughter would get a step up in basis if she inherited it. But that ship has sailed ....).