how do we maximize my retirement savings?

[Petunia 100]

Costs are not the only factor. And the entire investment shouldn't be in stocks.

When you're losing 2 - 3% of your principal per year to the costs of the annuity, the costs are a huge factor. It is extremely difficult to swim upstream against huge costs and come out ahead. Not impossible, but highly unlikely.

I didn't suggest the entire portfolio should be in stocks. When supplementing tax-advantaged accounts with taxable accounts, keeping the most tax-efficient investments in the taxable account is a great strategy. Both tax-managed funds and total market funds are good choices for the taxable account. Bonds, REITS, and high-turnover funds should stay inside the tax-advantaged accounts.

Under current tax law, yes. But will the 15% LTCG treatment still be there when you need the funds? Maybe yes, maybe no.

Very true, and a good point. However, worst case scenario is LTCG are taxed the same as ordinary income, which is what you pay with the annuity anyway. And you still avoid the high costs.

This also does not hold true for bonds. Interest income is fully taxable in the year earned, unless you go the muni route. And muni income may be less than you would get on tax deferred compounding income.

Precisely why the bonds stay inside the tax-advantaged accounts.

What if you need to change the allocation? Sell, pay cap gains, reinvest the rest. Reallocate 2-3x/year? Repeat for a portion. What about dividend income? Interest income? Capital gain distributions? Bond allocation?

There are more factors than just low cost, and assuming no trades will ever take place.

A total market fund has very little capital gains as it does very little trading. True, there are some taxable dividends. There is no need to sell to rebalance. Since it is only a part of the portfolio, rebalance inside the tax-advantaged accounts. If the taxable account begins to grow so large that it is approaching one's entire domestic stock allocation, then stop buying more and start buying a total international fund. Sell some foreign in the tax-advantaged accounts to compensate. There is no need to sell due to manager change (as you might wish to do with an actively managed fund) since there is no manager.

As I said above, I believe they are essentially last resort type accounts. If you want to keep your equity portion in taxable accounts, that's perfectly fine. I'm not selling annuities here. Just saying it is an option to consider.

Oh, I got that you said "as a last resort". I just don't agree. Not even as a last resort. I'm not going to forfeit 2 - 3% of my principal per year just to defer (not avoid) paying income tax on a minimal amount of dividends.

[jpg7n16]

When you're losing 2 - 3% of your principal per year to the costs of the annuity, the costs are a huge factor. It is extremely difficult to swim upstream against huge costs and come out ahead. Not impossible, but highly unlikely.

Who said pay 2-3%?

https://personal.vanguard.com/us/whatweoffer/annuities/saveforretirement

https://www.fidelity.com/annuities/FPRA-variable-annuity/overview

Variable Annuities: Charles Schwab: Low-Cost Variable Annuity

I didn't suggest the entire portfolio should be in stocks. When supplementing tax-advantaged accounts with taxable accounts, keeping the most tax-efficient investments in the taxable account is a great strategy. Both tax-managed funds and total market funds are good choices for the taxable account. Bonds, REITS, and high-turnover funds should stay inside the tax-advantaged accounts.

I agree. And a deferred annuity is a tax advantaged account.