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Q&A: No Double Deferral

Q:

I have had a longtime financial advisor who helped me with my 401k plan and my ROTH-IRA.  I am now getting ready to retire and my advisor has suggested that I take my 401k and buy a variable annuity.  What do you think?

A:

I think that advice like this should be criminal! One of the few (and relatively minor) benefits of a variable annuity is its tax deferral. That tax deferral comes at the cost of high expenses (sometimes up to 3% per year). Well, your 401k is already tax deferred. If you plan to transfer your 401k to some other retirement vehicle, open a Rollover IRA and move it there. Just don't do it with this greedy and incompetent broker/salesperson who is probably already counting the 5% to 7% commission paid by the VA.

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