Q. We have an annuity with John Hancock. In the nearly seven years we have had it, we have received no dividends from it. It is divided into 47 percent T. Rowe Price Equity Income, 12 percent T. Rowe Price Blue Chip Growth, and two other funds. We contributed $72,888. It is now $72,648.

The annuity has an enhanced death benefit that is now valued at over $98,000. My husband is in the latter stages of Alzheimer's, and I look on this as life insurance. However, I may be looking at it the wrong way. We would pay a penalty if we surrendered it before October 2007.

Looking back, I realize my husband was unable to understand what we were getting into. And I certainly didn't. Can give me some insight into this? ---B. H., by email

A. I think there may be some information missing. While the investment was made at the beginning of a major bear market and the expenses of the product reduced returns, I'm having trouble getting to the low value you are showing.

For instance, had you invested $10,000 in T. Rowe Price Equity Income fund, it would now be nearly $17,000. Even your large investment in T. Rowe Price Blue Chip Growth would be about break-even.

Then, again, the performance of the other funds may have been poor.

I think the solution is to wait until October to avoid any penalties. Then exit the variable annuity. You can do a 1035 exchange and roll it to a low-cost VA like the one Vanguard offers. Or you can leave the VA altogether and invest in managed mutual funds or index funds: Your move should have no tax consequences since your current value is essentially equal to your original investment.

If your husband's health is poor later this year, you should wait, because the death benefit increases the value of the contract by 35 percent.

Your experience is one of the reasons I don't think variable annuities are a good investment product. The high fees favor 100 percent equity investments, which you had, and the death benefit favors speculation, which you had. You were probably aided in your choices by a person who called himself an "advisor" who was really a salesperson for a particular product.

Had you invested the same amount of money in a variety of balanced funds in January 2000, your investment would now be worth at least 24 percent more and possibly 66 percent more. American Funds Income Fund A shares, for instance, would have risen 67 percent---after paying taxes on distributions--- and the salesperson would have received a commission. Had you invested the same amount in Vanguard Balanced Index, your investment would be up 24 percent, after taxes.

Q. In your response to a recent question regarding the value of a pension, you used the example of a lifetime annuity and ended by stating that taking a lifetime income from a portfolio was risky. Could this be mitigated by converting perhaps 25 percent of one's retirement assets into an immediate annuity and investing the balance in a stock/bond index portfolio? I am at the stage where a decision of this type needs to be made. ---T.K., by email

A. Recent research shows exactly that--- your investment portfolio is more likely to survive a long retirement if you convert a portion of your portfolio to a lifetime annuity. The reason for this is simple, if you think about it a bit. What destroys portfolios is high withdrawal rates--- rates that are far above the income-generating capacity of the portfolio. But if you convert a portion of your portfolio to a life annuity, you'll enjoy a big increase in monthly income, reducing the amount of money you'll need to take from the remaining investment portfolio. Of course, the older you are when you annuitize, the higher the income you will receive. That is why some financial planners suggest doing a serial annuitization--- buying one life annuity at, say, age 65, another at 70, and so on. Each will bring a higher income.