After all, earnings on VAs are taxed as income upon retirement. A number of issues go into a comparison between a VA and a mutual fund, among them current and future tax rates, expected growth, anticipated retirement date, and expenses. Because determining some of these factors involves guesswork, the final answer can only be considered a best-guess guide. In general, the more your investment grows and the longer you have until retirement, the more likely a variable annuity may make financial sense. Maybe the numbers work in an annuity's favor.
Costs count for a lot.
In fact, their offerings come cheaper than many mutual funds, insurance wrapper and all. Vanguard's are half the price of the mutual-fund average, at 72 basis points. TIAA-CREF takes the lead when it comes to VAs, averaging a mere 34 basis points for its stock subaccount expenses. Apply It To figure whether a VA is right for you, you'll need to know your current tax rate and have a good sense of what your retirement assets and income, and thus retirement tax rate, will be. You likely don't have a crystal clear vision of your future, but articles like Like Riding a Boogie Board , and others in our Improving Your Portfolio and Investing for Keeps series can help.