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What is a characteristic of a variable annuity?
A typical variable annuity offers three basic features not commonly found in mutual funds: tax-deferred treatment of earnings; a death benefit; and. annuity payout options that can provide guaranteed income for life.
What is a variable income annuity?
A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments, and then pays you a level of income in retirement that is determined by the performance of the investments you choose. Compare that to a fixed annuity, which provides a guaranteed payout.
What is a variable annuity guarantee?
Variable Annuity. A variable annuity is a type of annuity whose value is tied to the performance of an investment portfolio. Although variable annuities carry the potential of higher returns than fixed annuities, they don’t offer a guaranteed payout.
What is true about a variable annuity?
a variable annuity guarantees an earnings rate of return. a variable annuity does not guarantee an earnings rate of return. a variable annuity guarantees payments for life. a variable annuity does not guarantee payments for life.
What are the benefits of variable annuities?
Variable annuities give the contract holder periodic payments for the rest of his or her life, which protects against the possibility of outliving other assets. Variable annuities are also tax-deferred investments, so you pay zero taxes on any income and gains from the annuity until you withdraw the money.
Can variable annuities lose value?
You invest the funds in your variable annuity in one or more funds, most of which are mutual funds that focus on specific areas of the market. Because of the volatility any investment can experience, the value of your account can rise and fall with the market. You may lose money, but you might also earn quite a bit.
Why would anyone buy a variable annuity?
Unlike a 401(k), a variable annuity allows you to receive monthly income payments that are guaranteed for the rest of your life, which makes them a popular choice for people afraid of running out of money in retirement.
Are variable annuities a good investment?
a variable annuity could earn a higher return compared to other types of annuities.
Are variable annuities really that bad?
Although not all variable annuities are bad products (and not all annuity salesmen are bad people), they do tend to have high fees, complex contractual language, and “guarantees” that aren’t as nice as they seem. All of that can make for a poor investment decision.
Is a variable annuity a good idea?
Annuities are a good investment if you are buying them for the right reasons. You can buy annuities for safety, long-term growth, or income. For example, a fixed annuity might make an attractive alternative to a CD; a variable annuity might be bought for long-term, tax-deferred growth;