5 Reasons to Buy a Variable Annuity

Variable annuities are on the rise, with total sales topping $37.3 billion in the second quarter of 2013. That’s up 7.8 percent from the year’s first quarter. Read on to discover why so many savvy investors are putting their money into variable annuities.

Variable Annuities Don’t Lock You In to Your Investments

Variable annuities offer a diverse range of investment options. You can typically choose to put a percentage of your money into stocks, bonds, and money market instruments, or diversify your portfolio with a combination of these. The value of your variable annuity will depend on how these investments perform.

One of the great advantages of variable annuities is the ability to monitor your investments and move them around to maximize your earning potential. Insurers often charge transfer fees to make these changes, but if you’re smart your investment decisions can offset these costs.

Variable Annuities are Tax-Deferred

A variable annuity is made up of series of investments and an insurance contract which looks to protect you from financial hardship. Amongst other things, this insurance contract states that the tax on your investment earnings will be deferred. Put simply, you won’t pay taxes on your investment until your variable annuity enters the payout phase. You also won’t be taxed when you transfer your money from one investment type to another, although you may be liable for transfer fees.

Variable annuities are often criticized for their high fees, but the benefits of the tax deferral can outweigh these charges if you’re making a long-term investment. That makes them an attractive option for anyone planning for their retirement. Continue reading 5 Reasons to Buy a Variable Annuity

Can You Really Make Money “Investing” in Collectibles?

My husband loves collectibles. He has bought nearly every action figure associated with the Lord of the Rings movies. For his birthday last year, he insisted that I get him nothing; instead, he opted to buy a high-end Batman statue/figure. He’s already decided to forgo Christmas in favor of a Darth Vader statue from the same company.

One of his justifications for spending on collectibles is that it’s sort of an “investment.” After all, collectibles can be worth a lot of money down the road, right? (Personally, I don’t care if he spends on them, as long as he keeps it to what we can afford, but he likes to have a rationalization for his spending.)

Unfortunately, how much a collectible is worth later doesn’t depend on its popularity now, or even its “cool” factor. Whether you collect sports cards, movie cards, action figures, or Beanie Babies, here are some things to keep in mind before you “invest” in collectibles:

Is It Mass Produced?

The reality of any collectible is this: The more there are, the less valuable it is. Rarity matters when it comes to collectibles. There’s a Magic the Gathering card that goes for more than $800 in some circles — because it’s rare. And the label “Limited Edition” may not be enough to determine rarity. In some cases, there are still millions of “limited edition” collectibles produced and sold.

Some of the collectibles my husband has are rare. Consequently, they are likely to go up in price. He has one international LOTR scene set that has already doubled in “value” since he bought it. But just because it’s worth more now doesn’t mean that it will still be worth as much later.

Someone Needs to Be Willing to Pay

What happens when the market drops out? At the height of the Beanie Babies craze, people were paying insane amounts of money for little plush toys. Unfortunately, the market dropped soon. Eventually they stopped being the “must have” toy. Now you can get them for less than $5 on eBay. While some versions are still expensive, the demand in general just isn’t there — and that means that they are no longer as valuable as they once were.

This is a possibility with any collectible that you purchase. If you plan to purchase a collectible for investing purposes, you need to consider demand, and realize that you will only get what someone, somewhere is willing to pay.

Keep it in Good Condition

Because my husband is a collector, he cringes at my son’s habits. My son loves Legos, and Lego sets. He has quite a few Star Wars and Harry Potter themed sets. And mini-figures (including some that go for more than $20 apiece). Of course, my son is a 10-year-old boy. He opens the boxes and puts together sets. Some of the older sets have even been mixed around. Mini-figures are missing heads and arms. My husband knows that the Lego sets won’t be worth as much later on as a result.

If you expect to make money later on, you need to keep your collectibles in good condition — preferably in “mint” condition. If you can manage to hit on a rare item that people will want later, and if you can keep it in near-perfect condition for a few years, a collectible can be a decent investment.

What do you think? Do you view collectibles as investments?