Annuities - Advantages and Disadvantages

This article aims to describe the characteristics of a variable annuity , and provide an overview of the advantages and disadvantages of this type of investment .

Annuities, as discussed here, are used as an investment vehicle for retirement. They provide the investor a way to generate tax-deferred interest. Annuities differ in the options they offer the customer the opportunity to make a significant, and security. A variable annuity is the riskiest of the annuity. It allows the investor to invest in the annuity market or mutual funds. The investor (over 60 years) receives monthly payments, depending on the results of the investments. If the inverter is 60 years, the investor still receives tax benefits, but it can still receive the payment. It can be for a number of years, or for life. Most variable annuities offer a sub-account of the money market, which allows investors to switch to a fixed rate secure at any time.

advantage 

Historically, the stock market, as the S & P 500 had an average annual return of over 12 %, while fixed annuities historically , bills and insurance bonds usually offer interest rates to single digits . A variable annuity allows you to receive potentially higher returns

 All pensions are deferred tax exempt , which can be a great advantage over other investment vehicles .This type of annuity allows you to provide free real estate probate - which allows your loved 

ones to avoid inheritance tax. It also enables you to give gifts tax-free up to $ 10k per year per person .Variable annuities offer greater liquidity of fixed annuities . You can withdraw up to 10% per year during the first year without penalty. If at any time , their confidence in the evolution of the market, often have the opportunity to switch to a fixed rate - providing a very safe investment vehicle. Change your risk / return based on market conditions. 

disadvantages 

Variable annuities are not as safe as fixed annuities and CDs. You take the risk of putting your money in the market . 

Often , there are management fees, as a mutual fund . Always listening commissions or fees involved. 

Despite this investment provides some liquidity , do not invest money you need tomorrow. Withdrawals from income before the age of 59.5 or more than the allowed percent per year (depending on the contract ) may lead to a 10% IRS penalty . 

Like any investment , you should know exactly what you get ahead . Generally, variable annuities can offer an excellent investment vehicle for your savings grow tax-deferred , but there are risks. Always consult a trusted person before making this important decision.