The Pros and Cons of Variable Annuities
Are variable annuities a good buy for you? In the recent past, variable annuities have gotten both negative and positive attention in the media. Many articles have been published that detail variable annuities’ high gains, but many more have been published describing variable annuities’ fees, unethical sales practices, and the risk of losing principal. You may wonder if you are getting a balanced view from variable annuity salespeople and the articles published in the media. One way to decide if variable annuities are right for you is to consider the facts – the pros and cons of variable annuities.
On the pro side, variable annuities are tax-deferred until withdrawal, just like all other types of annuities. You will not have to pay one penny in taxes while your money resides in the annuity. Variable annuities also offer a death benefit, and if non-qualified funds (not part of your IRA or other tax qualified account) are used to purchase the annuity, impose no required minimum distributions at advanced ages, so you can choose if or when you would like to make withdrawals. Unlike other tax favored accounts, there is no limit to the amount of money you can contribute to a variable annuity. Last but not least, variable annuities allow you to allocate your money in investments by giving you control over a series of subaccounts, so you invest, as well as save.
This power to invest comes with some drawbacks – most importantly, the money in your variable annuity is not guaranteed. When you buy a variable annuity over other principal protected annuity products, you give up the protection that other annuity contracts offer. A variable annuity does not mean guaranteed returns – a very big concern. Also, most variable annuities impose higher fees than other types of annuities, depending on the issuing company. These fees, over time, can severely cut into your earnings. And, unfortunately, some companies offering variable annuities have practiced pushy, unethical sales tactics and have been accused of targeting vulnerable seniors into buying unsuitable variable annuities.
Do the pros outweigh the cons of variable annuities for you? If you are still unsure, contact the Annuity Specialists by calling 1-800-239-0356 or by visiting AnnuityAdvantage.com.
¹ First year yield/rate reflects fixed rate plus premium bonus or interest rate enhancement.
Interest is based on current rates and subject to change without notice.
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