The benefits of tax deferral will out weigh the costs of a variable annuity only if the investor holds it as:

Question

Quizplus · Accepted Answer

Tax deferral is most effective when investors hold their investments for a long period of time. This allows for the compounding of earnings and the deferral of taxes on those earnings to provide a greater benefit over time. Short-term investments may not provide enough time for the benefits of tax deferral to outweigh the costs of a variable annuity. Credit-risk investments and annuity investments are not relevant to this question.

The Benefits of Tax Deferral Will Out Weigh the Costs