Coulda, Shoulda, Woulda

$108,000 from $100k in ten years.  I could have done better keeping it in a savings account.  That would have been a poor choice, as well, though.  What would have happened if I had met my friend ten years earlier?  Would I have more in savings and how much would that be?  Leaving my money in my IRA let me ride the market with all its ups and downs.  The annuity had protection from the market that I couldn't get in my IRA.  First, here is how my money grew in ten years without protection.

Between 2000 and 2003, I lost almost $40,000.  Then the market recovered with that big bubble everyone talked about, but didn't do much to change.  Besides, who knew about credit default swaps and such?  I certainly didn't.  By 2007 I recovered my $40,000 and added another $13,000.  Wow!  Now I am back on track.  Well, almost.  In 2008, I dropped back to $71,000, again losing $40,000.  Finally, after all that pain and excitement, by the end of 2010, I recovered back to $103,000.  In ten years, my money had grown by $3,000. 

What if I had met my friend earlier, perhaps in 2000, before the first drop?  If I had met him, believed him and taken a chance with my money, I would have been ok.  Would I have actually done that?  It is difficult to say.  As a reminder, the annuity I have is called a variable annuity.  It lets me put my money in various types of mutual fund type accounts, including something that would have followed the S&P 500.  These are index funds.  The beauty of the annuity, though, is that when the market falls, the company continues to pay me 6% interest on my balance.  How different would my outcome have been?  Look at the chart below.

If I had put my money into this annuity in 2000, my money would have grown from $100,000 to $340,000!  My money would have more than tripled.  Leaving my money in my IRA I gained $8,000.  Putting it into an annuity would have given me $240,000.  How much would you have been willing to spend to get that return?