variable annuities

A variable annuity is usually the choice of people who really like to see their money work. Unlike fixed annuities, variable ones offer lots of flexibility. Their owners are in charge of what their annuities are invested in, and they can switch these investments as much or as little as they want - without creating a tax mess. But variable annuities are also a lot riskier.

Some advantages of investing in a variable annuity:

• Your money is free of taxes before annuitization and may be invested as you please.
• Variable annuities often keep up with the cost of inflation better than fixed annuities.
• If you're a good investor and lucky, you may make more money - a lot more - than with a fixed annuity. Variable annuities have the possibility of great long-term grown potential.
• You can contribute as much or as little money as you like with this type of plan.
• If you die before you've annuitized your earnings, you heirs receive all money you have invested and earned minus withdrawals.

However, variable annuities also have their drawbacks:

• If you turn out to be a bad investor or just unlucky, you could actually lose money - a lot of money. Often your principal and return aren't guaranteed.
• You may receive higher premiums, if your medical exam deems you a higher risk.
• Variable annuities usually have higher fees than fixed annuities.
• If you think fixed annuities are confusing . . .

 

Compare Variable Annuities with the more conservative ( FIXED ANNUITY )