Retirement Read Time: 3 min

Is a Variable Annuity Right for Me?

For the casual observer, it sometimes seems that variable annuities are either “terrible” or “wonderful.”

Commentators in the financial media seem to occupy a polarity of opinions we might see in politics. What gets lost when these commentators collide is “the individual.” Unfortunately, the discussion is rarely centered on whether a variable annuity is relevant and useful to you and your set of needs.

Before considering investing in a variable annuity, you may want to make sure that you are exhausting the contribution limits of your 401(k), IRA, or other qualified retirement plan.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.

At the end of the day, however, variable annuities are really a value judgment.

Do you value the guarantees and predictable income that annuities can provide?

Are the fees charged worth the price of mitigating the risk fluctuating markets can have on your financial security in retirement?

Only you can be the judge of what constitutes value to you. Leave the punditry on variable annuities to others and focus on whether they make sense for you.

The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Remember variable annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits.

Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies). Annuities are not guaranteed by the FDIC or any other government agency.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Share |
 

Related Content

Social Security Taxes

Social Security Taxes

Estimate how much of your Social Security benefit may be considered taxable.

Spotting Credit Trouble

Spotting Credit Trouble

The wise use of credit is a critical skill. These 10 questions will help you assess your skill level.

What's My 2023 Tax Bracket?

What's My 2023 Tax Bracket?

Check out this handy reference of updated ranges from the IRS in case your designated bracket has changed.

 

Have A Question About This Topic?







Thank you! Oops!

Whole Life Insurance Can Be an Asset For Balance

Even if you didn’t grow up on a farm, you’ve heard, “Don’t put all your eggs in one basket.”

How to Spend Again After Saving

When people save, it brings life rewards. But sometimes after being on your best money behavior for a long time, you want to cut loose and spend. It can happen whether you’ve been saving to buy a home, rejoined the workforce or survived a global pandemic.

Why Medicare Should Be Part of Your Retirement Strategy

How Medicare can address health care needs in your retirement strategy.

View all articles

What Is My Current Net Worth?

Use this calculator to estimate your net worth by adding up your assets and subtracting your liabilities.

Long-Term-Care Needs

Determine your potential long-term care needs and how long your current assets might last.

Disability Income

This calculator estimates your chances of becoming disabled and your potential need for disability insurance.

View all calculators

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

Principles of Preserving Wealth

How federal estate taxes work, plus estate management documents and tactics.

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

View all presentations

Emerging Market Opportunities

What are your options for investing in emerging markets?

When Do You Need a Will?

When do you need a will? The answer is easy: Right Now.

What Can a Million Dollars Buy You?

$1 million in a diversified portfolio could help finance part of your retirement.

View all videos