Getting The Facts About Variable Annuities
If you have been trying to find a way to secure your money, you have probably heard of a lot of different options. It is sometimes difficult to know which options are best for you. While some of these available options can be extremely beneficial, there are some that could potentially hurt you down the road. In any investment opportunity, you will want to consider all your options. Before making any final decisions, you will want to know exactly what you are getting yourself into. Here are some things to consider if you are thinking about the option of variable annuities. You will want to take into account the advantages but also the disadvantages of variable annuities.
Before really diving into the heart of it, or considering understanding the disadvantages, you will want to understand the basics of annuities. In a simple definition, annuity basically just means purchasing a regular flow of payments. There are different durations of annuities, some of which last a lifetime. Annuities are regularly purchased as a way to secure retirement savings for the future. Instead of a fixed amount of money every month, variable annuities distribute funds on a variable basis, based on the performance of a specific investment source. For a further description of variable annuities, or if you are really considering purchasing one, you will probably want to speak with a specialist.
Many people decide to go with variable annuities because there is a large opportunity for capital growth if the investment source is doing very well. http://www.phoenixtitleloan.com/phoenix-85004/ Just like with other investments, there is the possibility that you could earn a substantial amount of money. With this opportunity for growth, however, also comes a large added measure of risk. Along with that growth potential, there are also a lot of disadvantages of variable annuities that you will probably want to consider.
One of the disadvantages of variable annuities is that they are often uninsured. This means that there is the potential that you could lose a large portion of your hard earned money. For many people, this is a huge deterrent in choosing this route. If your chosen investment source is not doing well, you might be left without the money that you had rightfully earned in the first place, let alone earning any extra.
Many people are counseled not to use these annuities without first setting up another retirement investment plan. This is often looked at as another one of the disadvantages of variable annuities. If your money is spread too thin between various retirement investment plans, you might end up not having enough for your regular living.
Many people think that variable annuities cost too much. You might be surprised by all the added fees compared to other investment sources. You might also want to take into consideration the added costs of taxes. There are many people that will argue that money invested into a variable annuity is not affected by taxes, but as soon as you take the money out to live on, you will have to pay the regular income tax, just like everybody else. This is one of the major disadvantages of variable annuities.
Many people view the death benefit offered as one of the great things about this product, but a closer look might make it look more like one of the disadvantages of variable annuities. When the owner of one of these variable annuities dies, they are promised that heirs will be receiving at least the amount of money that was contributed into the annuity, minus the withdrawals. While this might sound really appealing, you will want to consider what that actually means. The problem is that with inflation money generally depreciates over time. So if you put in a substantial amount of money thirty years ago, that might not be very much today. Many other investment opportunities will guarantee some kind of an interest rate, which can ensure that your heirs get adequate money.
As stated previously, many people think that these annuities cost more than their competitors. Another reason for this is their excessive withdrawal charges. There are usually charges for early withdrawals which can mean up to seven years after purchasing the policy. There are also extra penalty charges if you withdraw more money than your regularly scheduled amount. These small fees can certainly add up over time.
If you are considering a new investment source, you will want to know all the facts before you decide to commit to variable annuities. The disadvantages of variable annuities just might outweigh the benefits.