Is a Variable Annuity Right for Me?

July 7, 2015

phil

annuity, tax deferred, tax sheltered, variable

Investing Insight, News, Retirement Planning, Taxation

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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.[images style=”2″ image=”http%3A%2F%2Frebelfinancial.com%2Fwp-content%2Fuploads%2FIRA-401k-annuity-dice-300×300.jpg” width=”300″ align=”right” top_margin=”20″ bottom_margin=”20″ left_margin=”20″ right_margin=”20″ full_width=”Y”]

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.

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 mitigate 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.

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.

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, LLC, 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 2015 FMG Suite.

Post by Phil Ratcliff

Phil Ratcliff, President of rebel Financial, is a senior financial advisor that holds an AIF®, CFP®, ChFC®, and CLU® certifications. He started his career at American Express Financial Advisors in 2003, then moved to AXA Advisors for 7 years before founding rebel Financial LLC in 2013.