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