Tax Avoidance with Variable Annuities

[MachineGhost]

I can't recall seeing any discussion about using variable annuities in here.  With the pathetic caps on retirement accounts easily reached, is everyone just using taxable accounts in lieu of variable annuities?  What's the dealio?

https://personal.vanguard.com/us/funds/ ... s/variable

EDIT: VA costs comparisons are in this post: http://gyroscopicinvesting.com/forum/ht ... 622#p61622

[dualstow]

I think I'm with Mr Swedroe when it comes to Variable Annuities.

http://www.cbsnews.com/8301-505123_162- ... annuities/
the one that bothers me the most:

Although there are tax-deferral benefits, you lose other tax-management options, such as receiving a step-up in basis,

http://www.cbsnews.com/8301-505123_162- ... not-there/
http://www.cbsnews.com/8301-505123_162- ... annuities/

[MachineGhost]

Thanks, but I'm not sure how valid Swedroe's (he's sure infamous around here!) criticisms are specifically to Vanguard's variable annuities which have an average expense ratio of just .59% a year. 

I don't care about the income or living benefits of annuities, just the tax deferral. 

I will be in a higher tax bracket at retirement and I sure doubt capital gains rates will go any lower in the future.

I also don't see how "tax management" offers any strong benefit over the crushing loss of compounding. 

There's also no surrender charges as Vanguard has eliminated it.

I sure don't care about any stepped-up-cost basis after I'm off this mortal coil.  That tax loophole is unikely to persist in the future either in a more techno-Orwellian society.

There is the typical 10% before 59.5 penalty from the IRS as with all retirement accounts but Vanguard offers free withdrawals.

Sure, 99.99% of insurance salesmen are rapaciously evil, but I'm specifically talking about Vanguard here.  Simplicity and low costs.  No salesman.

So what else am I overlooking?

[D1984]

Thanks, but I'm not sure how valid Swedroe's (he's sure infamous around here!) criticisms are specifically to Vanguard's variable annuities which have an average expense ratio of just .59% a year. 

I don't care about the income or living benefits of annuities, just the tax deferral. 

I will be in a higher tax bracket at retirement and I sure doubt capital gains rates will go any lower in the future.

I also don't see how "tax management" offers any strong benefit over the crushing loss of compounding. 

There's also no surrender charges as Vanguard has eliminated it.

I sure don't care about any stepped-up-cost basis after I'm off this mortal coil.  That tax loophole is unikely to persist in the future either in a more techno-Orwellian society.

There is the typical 10% before 59.5 penalty from the IRS as with all retirement accounts but Vanguard offers free withdrawals.

Sure, 99.99% of insurance salesmen are rapaciously evil, but I'm specifically talking about Vanguard here.  Simplicity and low costs.  No salesman.

So what else am I overlooking?

What about the LIFO/FIFO treatment of VAs vs Roth IRAs or Roth 401Ks (or even vs after-tax contributions of up to $51K per year to a 401K as per another recent thread)

Also, have you considered that if capital gains rates are higher in the future that ordinary income tax rates may be MUCH higher? The last time we had cap gains rates at 30 or 35% the top ordinary rate was 70% on "unearned" income and 50% on "earned" income.

What options does Vanguard's VA have for gold and LTTs? For foreign stock exposure? How much of that 0.59% is M&E charge and how much is the actual expense for the funds?

Have you ever considered using the Jefferson National or TIAA-CREF products that are offered in this category? They are both no load and may be just as cheap or cheaper than Vanguard.

Finally, would it not much sense if you do set up a VA to set up four different ones for each asset class for the first year? That way, if one asset class does really poorly you can surrender that annuity for an ordinary loss (not a capital one...this is an ordinary loss fully deductible against current earned income...no $3,000 limit applies) and 1035 the other three into one annuity and then rebalance (maybe add funds before you rebalance in order to make up for the money lost) into the four assets in equal amounts. I'm not sure what the wash sale rules are for an annuity subaccount, though.

[MachineGhost]

What about the LIFO/FIFO treatment of VAs vs Roth IRAs or Roth 401Ks (or even vs after-tax contributions of up to $51K per year to a 401K as per another recent thread)

If you can avail yourself of a Roth, then obviously they would be superior in virtually all cases.  No question and I'm even a fan of Solo Roth 401(K)'s which is the most "elite" approach.

VA's are LIFO because all profits are withdrawn first before principal on non-qualified income (which isn't taxed).  But again, what do you do once you've maxed out your retirement options or can't utilize them?

Also, have you considered that if capital gains rates are higher in the future that ordinary income tax rates may be MUCH higher? The last time we had cap gains rates at 30 or 35% the top ordinary rate was 70% on "unearned" income and 50% on "earned" income.

But we can't disparage that for VA's and act like its not an issue for traditional IRA's.  Traditional IRA's still dominate over Roth IRA's.  What guarantee is there that Congress will always want to keep the capital gains rate lower than income rates?  If anything, I fear the Progressives will want to raise the cap gains rate to match income rates and carve out a lower exception just for real investment, not speculation or financial investment.

What options does Vanguard's VA have for gold and LTTs? For foreign stock exposure? How much of that 0.59% is M&E charge and how much is the actual expense for the funds?

There is no gold or pure LTT's among the 17 choices available.  I see it only useful for the equity portion, both domestic and foreign.  As for costs:

Vanguard Variable Annuity:
Annual Administrative Fee: .1%
Annual Maintenance Fee: $25 if < $25K
Annual Mortality and Expense: .20% (.195% with current fee waiver)
Annual Investment Management Fees: .21% domestic, .52% international

So total annual costs on all invest amounts would be .51%/.81% not counting any enhanced death benefits which I've no interest in.  Unlike the vast majority of other insurance companies, there are no commissions, surrender or withdrawal charges.

Have you ever considered using the Jefferson National or TIAA-CREF products that are offered in this category? They are both no load and may be just as cheap or cheaper than Vanguard.

This seems why annuites get such a bad rap:

Jefferson Monumental Advisor:
Annual Advisor Fees: ??% (can't buy direct, huge disadvantage)
Annual Administrative Fee: $240
Annual Maintenance Fee: $0
Annual Mortality and Expense: 0%
Annual Investment Management Fees: .18% domestic, .51% international
Total Annual Costs: $25K: 1.08%/1.41% + advisor fees
Total Annual Costs: $50K: .66%/.99%  + advisor fees
Total Annual Costs: $75K: .50%/.83%  + advisor fees
Total Annual Costs: $100K: .42%/.75%  + advisor fees

TIAA-CREF Intelligent Variable Annuity:
Annual Administrative Fee: .3% (.1% with current fee waiver, .30% >$100K)
Annual Maintenance Fee: $25 < $25K
Annual Mortality and Expense: .4% (.25% >$100K, 0% >10yrs)
Annual Investment Management Fees: .1% domestic, .6% international
Total Annual Costs: $25K .80%/1.3% (<10yrs) .40%/.90% (>10yrs)
Total Annual Costs: $50K .80%/1.3% (<10yrs) .40%/.90% (>10yrs)
Total Annual Costs: $75K .80%/1.3% (<10yrs) .40%/.90% (>10yrs)
Total Annual Costs: $100K .65%/1.15% (<10yrs) .40%/.90% (>10yrs)

Prudential Strategic Partners Advisor:
Annual Advisor Fees: ??% (can't buy direct, huge disadvantage)
Annual Administrative Fee: $30
Annual Maintenance Fee: $0
Annual Mortality and Expense: 1.65%
Annual Investment Management Fees: .35% domestic, .88% international
Total Annual Costs: $25K: 2.12%/2.65% + advisor fees
Total Annual Costs: $50K: 2.06%/2.59%  + advisor fees
Total Annual Costs: $75K: 2.04%/2.57%  + advisor fees
Total Annual Costs: $100K: 2.03%/2.56%  + advisor fees

Fidelity Personal Retirement Annuity:
Annual Administrative Fee: .05%
Annual Maintenance Fee: $0
Annual Mortality and Expense: .20% (.05% > 1 million)
Annual Investment Management Fees: .10% domestic, .93% international
Total Annual Costs: $25K: .35%/1.18%
Total Annual Costs: $50K: .35%/1.18%
Total Annual Costs: $75K: .35%/1.18%
Total Annual Costs: $100K: .35%/1.18%

Schwab OneSource Annuity:
Annual Administrative Fee: 0%
Annual Maintenance Fee: $0
Annual Mortality and Expense: .65%
Annual Investment Management Fees: .28% domestic, 1.05% international
Total Annual Costs: $25K: .93%/1.70%
Total Annual Costs: $50K: .93%/1.70%
Total Annual Costs: $75K: .93%/1.70%
Total Annual Costs: $100K: .93%/1.70%

Finally, would it not much sense if you do set up a VA to set up four different ones for each asset class for the first year? That way, if one asset class does really poorly you can surrender that annuity for an ordinary loss (not a capital one...this is an ordinary loss fully deductible against current earned income...no $3,000 limit applies) and 1035 the other three into one annuity and then rebalance (maybe add funds before you rebalance in order to make up for the money lost) into the four assets in equal amounts. I'm not sure what the wash sale rules are for an annuity subaccount, though.

Excellent idea!  Since Vanguard is the clear winner and this "no frills" annuity category is relatively new, I think using the annual IRA contribution limit per year per annuity seems like a reasonable and low-risk way to get one's feet wet.  In CA though, you are put into a MM fund while you "trial it" for 30 days without charge unless you specifically object to that fund upfront.  Eventually, you could 1035 them all into one and avoid the $25 annual fees.

Vanguard does limit you to two portfolio changes per year, that is, swapping from one fund to another, so its not conductive to any kind of market timing, just strict buy and hold.  Can't say I'm too enthused about that one.

[D1984]

Jefferson Monumental Advisor:
Annual Advisor Fees: ??% (can't buy direct, huge disadvantage)
Annual Administrative Fee: $240 (.9% on $25K)
Annual Maintenance Fee: $0
Annual Mortality and Expense: 0%
Annual Investment Management Fees: .18% domestic, .51% international
Total Annual Costs: 1.08% to 1.41% + advisor fees

TIAA-CREF Intelligent Variable Annuity:
Annual Administrative Fee: .1%
Annual Maintenance Fee: $25 < $25K
Annual Mortality and Expense: .4%
Annual Investment Management Fees: .70% domestic, 1.2% international
Total Annual Costs: 1.20% to 1.70%

Where did you get the TIAA CREF investment management fees from? At https://www.tiaa-cref.org/public/pdf/an ... penses.pdf it shows investment fund management fees as low as 0.09% plus 0.01% for "acquired fund expenses" for a total of 0.10% (I guess that's for their S&P 500 index option which is the cheapest one they offer and is one of the four components of the PP). Admittedly their M&E is higher than Vanguard (their VUL and SVUL have an above average M&E as well) but both their VUL and VA scale down the M&E once you reach $100K of assets (and the scaled down M&E applies to the entire amount, not just the portion over $100K). Also, if you hold the thing for more than 10 years, the M&E goes away entirely unless you elect any sort of death benefit (and you said you weren't interested in a death benefit). Does Vanguard's M&E charge go away in five years or in ten years (I presume Vanguard's also scales down as well over $100K)?

Also, for the Monument Advisor, couldn't you buy it from an hourly fee only advisor--someone like Allan Roth comes to mind but I know there are others out there--rather than an AUM percentage fee advisor; you'd pay a one time hourly fee of a few hundred bucks, true, but that would be it for purely advisor fees. Also, the admin fee isn't technically $240, it is $20 every month (which covers the M&E as well; see https://www.jeffnat.com/home/products/m ... dvisor.cfm ); for a large enough amount (around $85K or greater) it would be cheaper in this area than Vanguard when you combine M&E and admin costs. Finally, the Monument Advisor has almost 400 investment choices, some of which are DFA if tilting to value is your thing. I haven't checked if they have any suitable LT bond choices.

But we can't disparage that for VA's and act like its not an issue for traditional IRA's.

Fair enough, but the proper comparison is with a non-deductible (not a Roth 401K contribution, just an after-tax one) contribution to a traditional 401K or IRA, not to a deductible IRA or 401K (since payments to a VA aren't deductible either). Do contributions made after tax (not Roth, just after tax) to a traditional 401K receive FIFO treatment or LIFO? In other words, if you put in $17K pre-tax (deductible) and $17K after tax into a traditional 401K and then withdrew 17K the next day, would it be treated as a withdrawal of the first 17K (the deductible one, subject to tax--plus a 10% penalty under age 59 and 1/2), the other 17K (the after tax one....IIRC not subject to tax or penalty until basis is withdrawn because it was after all made after tax) or a 50/50 pro-rata mixture? I know with IRAs there is the combination of non-deductible and deductible IRAs and the Form 8606 basis calculations and all that but how are withdrawals treated from a  401K when non-deductible contributions are made to it (assuming one does not do the good old "backdoor Roth" trick but instead just flat out withdraws the money)?

[One day at a time]

Can one of the better informed here detail the sequence that would lead to considering Vanguard VAs?

Here is my thinking, in terms of maximizing tax avoidance:
Roth 401K
Non-deductible IRA
SEP (if side job, self employed)
....I hadn't thought of a VA. 

[dualstow]

I sure don't care about any stepped-up-cost basis after I'm off this mortal coil.  That tax loophole is unikely to persist in the future either in a more techno-Orwellian society.

I do, and I guess I'm not as cynical as you about the future. A stepped up basis is a big deal.
That's the dealio. In my case, anyway.

[dualstow]

P.S. MG - if you happen to have satellite radio, they're talking about annuities on the Mutual Fund Store show right now. If not, I'm pretty sure their shows are downloadable.

[MachineGhost]

Where did you get the TIAA CREF investment management fees from? At https://www.tiaa-cref.org/public/pdf/an ... penses.pdf it shows investment fund management fees as low as 0.09% plus 0.01% for "acquired fund expenses" for a total of 0.10% (I guess that's for their S&P 500 index option which is the cheapest one they offer and is one of the four components of the PP). Admittedly their M&E is higher than Vanguard (their VUL and SVUL have an above average M&E as well) but both their VUL and VA scale down the M&E once you reach $100K of assets (and the scaled down M&E applies to the entire amount, not just the portion over $100K). Also, if you hold the thing for more than 10 years, the M&E goes away entirely unless you elect any sort of death benefit (and you said you weren't interested in a death benefit). Does Vanguard's M&E charge go away in five years or in ten years (I presume Vanguard's also scales down as well over $100K)?

"As low as" just means a money market fund.  I selected the cheapest domestic and international fund available.  You can only choose from the funds allocated to a specific annuity program, not just any fund offered by the company.  I did not read anything about scaling down the M&E in the "no frills" category from any of the companies, so I suspect they are permanent fees.  It would be their advantage to advertise otherwise, I would think.

Also, for the Monument Advisor, couldn't you buy it from an hourly fee only advisor--someone like Allan Roth comes to mind but I know there are others out there--rather than an AUM percentage fee advisor; you'd pay a one time hourly fee of a few hundred bucks, true, but that would be it for purely advisor fees. Also, the admin fee isn't technically $240, it is $20 every month (which covers the M&E as well; see https://www.jeffnat.com/home/products/m ... dvisor.cfm ); for a large enough amount (around $85K or greater) it would be cheaper in this area than Vanguard when you combine M&E and admin costs. Finally, the Monument Advisor has almost 400 investment choices, some of which are DFA if tilting to value is your thing. I haven't checked if they have any suitable LT bond choices.

You could, but why would you want to be stuck in a permanent relationship with a fee only advisor who controls your access to your annuity/funds?  Unless you really want access to 309 mostly overpriced mutual funds like DFA for a tilting advantage that is likely to be eaten away by the higher investment management fees.  Color me skeptical.

I do agree that at $85K Monument starts to become lower cost than Vanguard not counting the advisor fees, but again you are stuck dealing with a dumbshit "financial advisor" to make any changes, to buy new annuities, switch portfolio investments, etc..  I'll take directly managing my account online over that B.S..  But I'll admit the increased costs of Vanguard over Monument will reach a tipping point at a certain threshold.  What a racket.

know with IRAs there is the combination of non-deductible and deductible IRAs and the Form 8606 basis calculations and all that but how are withdrawals treated from a  401K when non-deductible contributions are made to it (assuming one does not do the good old "backdoor Roth" trick but instead just flat out withdraws the money)?

Both after and pre-tax contributions vastly complicate withdrawals, so most retirees elect to take the after-tax principal balance out as a lump sum distribution (no icome taxes due) so their future withdrawals are simpler, otherwise they will include both taxable and non-taxable amounts and not pro-rata either.

I bet Boss MT could actually answer your question succinctly.  Let's hope he's watching and will respond.

[MachineGhost]

I do, and I guess I'm not as cynical as you about the future. A stepped up basis is a big deal.
That's the dealio. In my case, anyway.

If you elect a death benefit, do you still care about a stepped up cost basis?  I don't think a death benefit gives the portfolio directly to heirs.  So wouldn't it still be moot?

[dualstow]

If you elect a death benefit, do you still care about a stepped up cost basis?  I don't think a death benefit gives the portfolio directly to heirs.  So wouldn't it still be moot?

That's a good question. I have a sister-in-law who works in Fidelity and who occasionally asks me if I'm interested in VAs. Possible vested interested (No, she and my wife don't leave roller skates on the stairs for me to trip on.  )  I need to fully explore the details of VAs, but no VA & bequeathing my stocks to my wife at a stepped up basis seems like the way to go for me.

[D1984]

"As low as" just means a money market fund

The prospectus for their Intelligent Life VA clearly shows (under the expenses section for domestic funds) that their TIAA CREF Life Stock Index Fund (a Russell 3000 TSM fund or actually a separate account version of such) has expenses of 0.10%...it's an equity fund, not a MM fund. Their website at http://www1.tiaa-cref.org/public/perfor ... /1902.html does show 0.70% for the fund but under "Net Total Annual Portfolio Operating Expenses" for this fund in their prospectus ( http://www1.tiaa-cref.org/public/prospe ... dclass=ATA ) they show total expenses at 0.10%. I think (admittedly I may be wrong here) that the other 0.60% can be explained as follows:

From http://www1.tiaa-cref.org/public/perfor ... /1902.html

"1. Expense charge includes both separate account and fund level charges. Separate account charges reflect the highest possible mortality and expense risk charge although they may be lower. The unit value reflects the election of the Guaranteed Minimum Death Benefit."

in other words, the actual fund investment management charges are 0.10% but if you include the GMDB charges (which are entirely optional...don't elect the GMDB if you don't want it) and the M&E charges then it comes out to 0.70% at current levels or 1.07% maximum allowable. This brings to mind two salient points:

One, trying to say 0.70% is the fund charge AND then saying they charge 0.4% for the M&E charge is double-counting and thus deceptive and a little unfair,

Two, the M&E charge scales down with over $100K and disappears entirely after ten years (it''s in the prospectus; pgs 3 and 4). Does Vanguard's ever disappear (not trying to shill for TIAA...I think it and Vanguard are both OK choices...but I do think an all-in comparison of expenses should take into account each expense only once--no double counting--and also should consider how long something like an M&E charge lasts....if I plan to hold an annuity for 30, 40, or even 50 years having no M&E charge past year 10 could more than make up for the M&E in years 1-9, especially if I have over $100K of assets in the first 10 years so I pay only the reduced M&E to start with)?

You could, but why would you want to be stuck in a permanent relationship with a fee only advisor who controls your access to your annuity/funds

If he's an hourly adviser, then you wouldn't much need him after the first consultation (and you'd only need him then to sell you the thing). Have him sign a contract that says he's selling you it and that any yearly portfolio reviews, etc are NOT required and that they are allowable if YOU want to do them but otherwise he is not further involved. Even if you had to pay a small fee to him to accept any annual contributions (or to do a once yearly rebalance...which should take about 10 minutes of his time even if he bills you for an hour since that's probably his minimum billing time increment) you made and put them into the annuity (that is assuming you weren't allowed to contribute directly in the first place...by "go through an adviser" I'm not sure how much he would be required to be involved once everything was set up and running) it might be worth it.

If he is an hourly advisor and not an AUM or performance based one, I don't see why he would legally have to be involved any time after the first meeting where you bought the product. It would be no different than employing a lawyer or consultant by the hour; once they've performed their services you required (and they've billed you and you've paid) they don't bother you any more until and unless you contact them and ask them to work for you again.

[MachineGhost]

That's a good question. I have a sister-in-law who works in Fidelity and who occasionally asks me if I'm interested in VAs. Possible vested interested (No, she and my wife don't leave roller skates on the stairs for me to trip on.  )  I need to fully explore the details of VAs, but no VA & bequeathing my stocks to my wife at a stepped up basis seems like the way to go for me.

I've read that Fidelity offers simple "no frills" VAs like the few other companies mentioned, so that may not be as much of a vested interest as you suspect, although I haven't chcked it out yet.  Fortunately, with the "no frills" VAs being so few, it's not a monumental job to fully explore the details as we're doing in this thread.

[MachineGhost]

Another thorn on the rose...  some states have premium taxes assesed on non-qualified payments made into a VA:

Maine 2.00%
South Dakota 1.25%
Wyoming 1.00%

And some states have a premium tax on the qualified or non-qualified accumulated value if the owner decides to receive annuitized payments instead of a lump-sum distribution:

California .50%q 2.35%nq
Nevada 3.50%nq
West Virgina 1.00%q 1.00%nq

And thanks to Obamacare, nonqualified distributions that are earnings are hit with the 3.8% Medicare tax if you are "rich" enough.

[MachineGhost]

Two, the M&E charge scales down with over $100K and disappears entirely after ten years (it''s in the prospectus; pgs 3 and 4). Does Vanguard's ever disappear (not trying to shill for TIAA...I think it and Vanguard are both OK choices...but I do think an all-in comparison of expenses should take into account each expense only once--no double counting--and also should consider how long something like an M&E charge lasts....if I plan to hold an annuity for 30, 40, or even 50 years having no M&E charge past year 10 could more than make up for the M&E in years 1-9, especially if I have over $100K of assets in the first 10 years so I pay only the reduced M&E to start with)?

I find no references to the M&E disappearing with Vanguard.  I've updated the TIAA-CREF stats with these new findings.  It moves into second place now for the first 10 years.  I estimate it would take a total of 38 years to break-even over Vanguard with the 0% fee after the 10th year.

[MachineGhost]

Can one of the better informed here detail the sequence that would lead to considering Vanguard VAs?

Here is my thinking, in terms of maximizing tax avoidance:
Roth 401K
Non-deductible IRA
SEP (if side job, self employed)
....I hadn't thought of a VA.

KevinW outlined it best in another thread.  I would replace the SEP with a Solo Roth 401(K) though.

[AgAuMoney]

The SEC has a nice summary page on variable annuities with some advantages and disadvantages  and reference links.  http://www.sec.gov/investor/pubs/varannty.htm

Investopedia has a good summary of the different types of annuities.  http://www.investopedia.com/articles/pf ... s.asp&nbsp; Notice the regulatory difference.  Also has a lot of links to more info.

Finally, the various consumer protection groups report that annuities are one of the most complaint ridden consumer products and variable annuities are the worst of the bunch.

[MachineGhost]

I've updated the stats and have included Fidelity, which is the new winner for domestic.  Fidelity takes the refreshing approach that a VA is a tax-deferred vehicle and not insurance, so there are no additional riders and fees.

http://gyroscopicinvesting.com/forum/ht ... 622#p61622

Similar to Vanguard, Fidelity has market timing restrictions of 1 roundtrip per a rolling 90 days and 4 roundtrips per a rolling 12 months.  On at least the 4th roundtrip they place you on probation by making future exchanges mail-only for 12 months.  On the other hand, they offer an Automatic Rebalancing feature that can be run quarterly, semi-annually or annually...  perfect for keeping the PP in check.

I found the fine print in the below to be very informative:

[align=center][/align]

[annieB]

Schwab allows 12 rebalances per year,then a $10 charge after that.

[rocketdog]

I'm by no means an expert on VAs (is anybody?), but I'm currently reading "Keep What You Earn" by Terry Coxon (HB's old business partner and the first manager of the PRPFX fund).  It's still worth a read if only for its references to the PP concepts and asset protection. 

Anyhoo, I seem to recall from the book that annuities in general only have one thing going for them:  asset protection (because the money you paid to fund the annuity is no longer a part of your estate).  Annuities have undoubtedly changed in the years since Terry wrote the book (my copy is over 15 years old), so he may feel differently today. 

I'll have to look that section over again and post more details regarding the potential use of annuities for tax purposes.

[MachineGhost]

Anyhoo, I seem to recall from the book that annuities in general only have one thing going for them:  asset protection (because the money you paid to fund the annuity is no longer a part of your estate).  Annuities have undoubtedly changed in the years since Terry wrote the book (my copy is over 15 years old), so he may feel differently today. 

I'm pretty sure he was talking about Swiss annuities.  Coxon was/is an offshore huckster.  He was even indicted by the SEC at least once: https://www.sec.gov/litigation/opinions/33-8271.htm

[MachineGhost]

Schwab allows 12 rebalances per year,then a $10 charge after that.

News to me.  I'll update the comparison.

[rocketdog]

Anyhoo, I seem to recall from the book that annuities in general only have one thing going for them:  asset protection (because the money you paid to fund the annuity is no longer a part of your estate).  Annuities have undoubtedly changed in the years since Terry wrote the book (my copy is over 15 years old), so he may feel differently today. 

I'm pretty sure he was talking about Swiss annuities.  Coxon was/is an offshore huckster.  He was even indicted by the SEC at least once: https://www.sec.gov/litigation/opinions/33-8271.htm

That case had nothing to do with offshore dealings.  And being indicted by the SEC is not often what it seems.  My wife is the SEC reporting manager for an investment firm.  She says that the majority of businesses in this country are in violation of at least one SEC rule, so the SEC gets to pick and choose who they want to make an example of.  It's like speeding: almost everybody does it, but only a handful get caught and punished for it. 

Coxon does mention Swiss annuities in the book, but not exclusively.  He covers several different types of annuities.  He does make a strong case for protecting your assets with foreign trusts, but that was before some of the laws changed so I'm sure most of his advice is outdated today. 

[MachineGhost]

Coxon does mention Swiss annuities in the book, but not exclusively.  He covers several different types of annuities.  He does make a strong case for protecting your assets with foreign trusts, but that was before some of the laws changed so I'm sure most of his advice is outdated today.

What does he say about variable annuities?

Offshore trusts can still be made to work, but its a heck of lot more convoluted than it used to be.  Can neither be the grantor nor the beneficiary and may be better to involve a foundation and IBC in a triumvirate.  The lengths some people go to just to avoid income taxes is silly because a simple umbrella insurance ridier would do the asset protection job cheaply, safely, easily with no need to rely on arm's length transanctions through a questionable offshore trustee.