Are you willing to take some risk for a higher return?
Variable annuities combine some of the features available by investing in the stock market with the tax advantages and lifetime income offered by annuities.
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Invest in subaccounts
Variable annuities allow you to invest your savings in a variety of portfolios, referred to as subaccounts. Subaccounts are similar to mutual funds and can include stocks, bonds, money market funds or other securities. You select the subaccounts to invest in and choose how to allocate your money.
Risk
There is some risk involved in variable annuity investments. Your rate of return is based on the performance of the subaccounts you choose. In most cases, variable-deferred annuities offer more potential for growth than a fixed-deferred annuity. However, with greater potential comes greater risk. Your principal and any returns can be lost if the subaccounts perform poorly.
Tax advantages
Returns from variable annuities are subject to the same tax advantages offered by deferred annuities. Variable annuity gains are not taxed until you make a withdrawal. The amount you earn is credited to your subaccounts, which allows your investment to compound more and grow faster than other savings plans.
Few guarantees
Your rate of return and the amount of each paycheck you receive when you annuitize is not guaranteed. The only guarantee with the variable annuity is that the death benefit will never be less than the total of the premiums paid minus any withdrawals. Some variable annuities offer additional options; for example, a death benefit that equals the annuity's highest account value on any anniversary date within the past five years.
Note: AccuQuote does not sell variable annuities. The information about variable annuities/registered products is provided for educational purposes only.
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