Is a Variable Annuity Right for Me?

Posted on Monday, July 23, 2018

For the casual observer, it sometimes seems that variable annuities are either "terrible" or "wonderful."

Commentators in the financial media seem to occupy a polarity of opinions we might see in politics. What gets lost when these commentators collide is "the individual." Unfortunately, the discussion is rarely centered on whether a variable annuity is relevant and useful to you and your set of needs.

Before considering investing in a variable annuity, you may want to make sure that you are exhausting the contribution limits of your 401(k), IRA or other qualified retirement plan.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity sub-accounts will fluctuate in value based on market conditions, and may be worth more or less than the original amount invested if the annuity is surrendered.

At the end of the day, however, variable annuities are really a value judgment.

Do you value the guarantees and predictable income that annuities can provide?

Are the fees charged to mitigate the risk fluctuating markets can have on your financial security in retirement worth the price?

Only you can be the judge of what constitutes value to you. Leave the punditry on variable annuities to others and focus on whether they make sense for you.

The guarantees of an annuity contract depend on the issuing company's claims-paying ability. Remember variable annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits.

Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contact. Withdrawals and income payments are taxes as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless there is an exception). Annuities are not guaranteed by the FDIC or any other government agency.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.