This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Deathmatch: IRAs vs Annuities

Variable annuities also charge fees for optional benefits like a guaranteed minimum income, an increased death benefit or long-term-care insurance.

Advantage: IRA

Taxes

Variable annuities and IRAs offer tax-deferred growth, and withdrawals from variable annuities and traditional IRAs are taxed as ordinary income. (In both cases, early withdrawals -- those made before you reach age 59½ -- carry a 10% tax penalty.)

But while traditional IRA contributions are usually tax-deductible, Roth IRA contributions and contributions to your variable annuity are not. The trade-off? The former requires you to start taking out money by the time you reach 70 1/2, whereas Roths and annuities do not have any required minimum distributions.

Advantage: Too close to call

Contribution limits

IRAs have a $5,000 limit in 2008 -- plus another $1,000 if you're 50 or older -- while variable annuities have no contribution limits. Both types of accounts allow for tax-free rollovers, although rolling over your annuity can result in restarting the clock for the surrender period.

Advantage: Variable annuity

Investment options

Both variable annuities and IRAs allow a measure of control over the underlying investments in your account. With a variable annuity, your investment options are typically limited to a handful of stock or bond funds called subaccounts. What's more, many companies charge fees for changing your asset allocation.

IRAs, meanwhile, allow you to invest your savings in virtually any kind of investment, from stocks to bonds to certificates of deposit. You're generally only limited by the selection offered by your particular broker.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AIG $56.99 0.00%
HIG $41.84 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs