A variable annuity is similar to a 401k in some respects because you can choose for yourself which investments you would like to make up your portfolio. The premium can be divided with portions being used to fun several subaccounts that are diversified according to risk. These separate investments may include an ultra conservative money market fund, bonds, mutual funds, and more risky areas such as international equities. When purchasing these products, you have the choice of either making a full premium payment upfront or investing into the fund by making your payments over a set period of time.

You can typically expect the following features from a variable annuity:

A flexible premium that is paid either in a simple upfront payment or invested in gradually over time. Offer more equitable investments such as stocks and mutual funds as opposed to CDs You choose how risky or safe you would like your investments to be and allocate among them however you like You are able to shift your investments without penalty as you wish in order to adjust for the market You will receive checks every month with a rate of return depending on the performance of your investments. Generally, you are free to invest as much as you like tax free.

If you are interested in getting the maximum return on your investment, then it is recommended that you choose a variable annuity as opposed to the fixed rate alternative. They have provided higher yields historically, with the catch being that there is greater risk over short and medium time periods. It is impossible predict just how well risky investments can perform, but judging from the past they can typically be expected to yield up to 12 percent over a period of 10 years or more.

Although this is a very trusted and widely used investment, it is a good idea to become familiar with the disadvantages of these annuities as well. For example, if you make any withdrawals for income before you reach the age of 59.5 you will be charged a 10 percent tax penalty. In addition, they are not considered to be a capital gain so although the growth is deferred, you will still be taxed according to the regular income tax rates. There are also certain fees associated with these accounts such as management and annual contract fees to cover certain expenses.

How Variable Annuities Work

A variable annuity has two phases: an accumulation phase and a payout phase.

During the accumulation phase, you make purchase payments, which you can allocate to a number of investment options. For example, you could designate 50% of your purchase payments to bonds, 40% to stocks, and 10% to a money market fund.

The money you have allocated to each fund investment option will increase or decrease over time, depending on the fund’s performance. In addition, variable annuities Cialis Jelly often allow you to allocate part of your purchase payments to a fixed account. Silagra A fixed account, order viagra on line unlike a mutual fund, pays a fixed rate of interest. The insurance company may reset this interest rate periodically, but it will usually provide a guaranteed minimum (e.g., 4% per year).

If you would like to find the variable annuity that will give you the highest yields, you will first have to be experienced in managing flexibility in your investments. The right financial advisor can help you to choose the investments that will make you the most money. Please visit www.onlineannuityrates.com today in order to have them connect you with the perfect advisor for your needs. The site does not charge for any of their services and they have one of the most extensive databases of professional accountants, mortgages brokers, and lawyers on the Net.

Author Bio: Lisa Cintron is Executive Vice President at OnlineAnnuityRates.com, an annuity guide to help you through the process of due diligence when researching immediate annuity rates as well as immediate and accurate annuity rates and quotes.

Category: Finances
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