Variable Annuities

New York -- Memo to investors who are now being blitzed by insurance agents selling a "last chance" to buy tax-deferred annuities.Relax.There may indeed be a "last chance" someday. But it won't be now.What started the blitz was President Bush's State of the Union message, in which he proposed to end the tax deferral for certain annuities. In general, he'd allow the tax shelter only for people who agreed to keep their annuities for life. He'd also leave pension annuities alone.But you wouldn't be allowed to chuck money into a tax-deferred annuity for just a few years and then cash out.Within a few days after the speech, I was deluged with letters and faxes from insurance agents, urging that I advise readers to buy an annuity quick, before it melts.

Annuities, those instruments which permit your money to grow free of tax until you withdraw it, are being promoted with a hard-pitch selling campaign. They're pushed through mass mailings and phone calls by a vast array of companies that now includes not only insurance firms but brokers, mutual fund firms and bankers. It's working: Last year annuities took in $54 billion in new money.But, as with any investment, you must do your homework. Find out all fees, understand returns and be wary of insurance firms with financial woes.

With insurance companies such as First Executive and First Capital going under and holders of their annuities unable to get ++ their money out, you might be a little leery if you get a call from a salesperson offering a variable annuity.But because of the way it is structured, a variable annuity may -- repeat, may -- be safer than a fixed annuity. That does not mean you should rush out and buy one. Variable annuities are as complicated as they sound. But with about $50 billion sold already, someone is buying them.