Killed by Fine Print

The dumbest mistake I ever made was in the late 1960s, when I was 40ish. I deposited money each month into an annuity for my retirement. Later I decided that I could do better elsewhere — but I didn't consult the microscopic fine print. Withdrawing early, I got back about $9,000 of my invested $21,000 and almost had to retire right then due to shock or death on the spot. I learned my lesson: Read now or pay later.

— Mel Vickery, Sierra Vista, Ariz.

The Fool Responds: That's a good lesson. It's also smart to steer clear of variable annuities, as they have many disadvantages. For example, they typically sport high fees, can tie up your money for a long time, carry steep early withdrawal penalties, and your withdrawals will be taxed as ordinary income and won't enjoy the usually lower capital gains rate. A better option for some people is the fixed, or income, annuity. With that, you pay a set sum and receive guaranteed payments for the rest of your life. Learn more at www. fool.com/retirement/annuities/annuities. htm or in "Annuities For Dummies" (For Dummies, $22) by Kerry Pechter.

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