Making the Case for Variable Annuities

In last week's column, I told you I was reconsidering my negative opinion about variable annuities. The rap on them is that they're too expensive and that the tax advantages are less than meets the eye.

But research by John Huggard, a North Carolina State University professor who is also an estate-planning lawyer in Raleigh, N.C., suggests that in some cases annuities are a better deal than mutual funds. Yes, fees are higher for annuities, but Huggard says capital-gains taxes on distributions can be a much bigger burden for investors in mutual funds.

In a recent article in Financial Planning Magazine, Huggard sketched this scenario: ...