Bao An Gongsi

Posts Tagged ‘Account Balance’

Many investors have little understanding of annuities or variable annuities but I hope to change that today. I’m not offering investment advice or recommendations rather my goal is to educate you on the pros and cons of variable annuities so you can make a more informed decision.

Annuities are meant to be long term investments so if you need to access the money in a few years they are probably not for you. There are many companies that offer variable annuities and they all have different features. Some offer guaranteed future income and others guarantee the initial investment. You must read the prospectus to fully understand what each annuity provides or consult a financial advisor.

I like to think positively so let’s start with the pros of variable annuities. Remember each company may offer slightly different features but you can expect most of these will be included.

Pros

Death benefit can ensure your family receives a portion of the account balance Ability to guarantee income until you die, also called annuitizing Deferred taxes until withdraws are made No contribution limits like 401ks or IRAs Take a loan against the value of the annuity for a fee Investments may increase over time outpacing the rate of inflation
Cons

Commissions on variable annuities can be 4 percent to 8 percent Administrative and insurance fees average 2.2 percent of the assets each year Gains taxed as regular income not as capital gains which have a lower rate Surrender fees can be significant if you close the account within 7 years If you withdraw prior to age 59