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Chapter 16. Tax-Sheltered Annuities > Do Annuities Fit into Your Portfolio? - Pg. 162

Tax-Sheltered Annuities 162 Warning! Let's say you've purchased a deferred variable annuity with periodic premiums. Then you lose your job, but still need to pay the mortgage, and your kid has just gone off to State U. If you pull money out of the annuity, you may be facing an IRS penalty of 10 percent and an insurance company back-end surrender charge of up to 15 percent. Think long and hard before you do this. Do Annuities Fit into Your Portfolio? At the beginning of the chapter we mentioned that an annuity may be something you might want to include in your retirement portfolio. Before you even consider an annuity, be sure you have maxed out your 401(k); in other words, have you put in the very most they will allow? You get tax deferral with your 401(k), but more important, you are allowed to put your dollars away pre-tax. This is by far the very best tax shelter the IRS and Congress have allowed us lowly taxpayers. Also check to see if your plan allows you to put in after-tax dollars that will also be allowed to work for you on a tax deferral basis. Next on your list, check out Chapter 21, "No 401(k)? No Problem!" to see if you are eligible for either a deductible IRA or a Roth IRA. If you're married and your spouse is not employed, have you looked