Best Variable Annuities: Retirement Investing Made Simple

To understand and choose the best variable annuities, you must first learn about variable annuities. A variable annuity can be defined in simple terms as a contract between the insurance company and the insurer (yourself). This contract is based on an agreement from the insurance company to make monthly payments to you; these payments can begin immediately or at a future date. The contract is acquired through the payment of a lump sum or through a series of payments.

Variable annuities offer the investor a range of investment options, and the value of your investment will depend on the investment options you choose. These options primarily include stocks, bonds, money market instruments, or some combination of the three. Although variable annuities are invested in mutual funds, they should not be considered mutual funds because:

1. You receive periodic payments for the rest of your life or your designated beneficiary does.

2. There is a death benefit attached to variable annuities that guarantees that your beneficiary will receive a specific amount in the event of your death.

3. Variable annuities have the advantage of deferring taxes; No income tax is applied to income or investment earnings until you actually start withdrawing your money.

One of the biggest financial risks most people face is not volatile market conditions and loss of savings, but longevity. Will you outlive your money? It has become a hot topic for most of the people. Preparing for a long and happy retirement life is of the utmost importance, and with that is all about choosing the best variable annuities to keep you safe.

One type of investment is the immediate annuity plan: you give the insurer an amount of money, and the company will pay you an agreed amount of money every month for your life. This is a good scheme as long as your insurer remains solvent and can make payments over its lifetime. If you break the contract, you could end up paying a very large fine, so choose wisely.

When choosing the best variable annuities, you should base your selection on one fundamental principle: The company must be a reputable company that has been around for a long time. Insurers should be able to offer you immediate annuity options and have an ‘A’ rating (for financial security) from Moody’s Standard and Poor’s, among others. Make sure the company you choose has ratings of at least 2-3 services that provide the ratings. Then consider the size of the monthly payments; Women are expected to have a longer life expectancy, so the payments are lower for them. You can add inflation riders to your annuities to ensure a return of performance, but you need to make sure it’s a good fit for you.

One important piece of advice to keep in mind when choosing the best variable annuities is not to invest more than $100,000 with any one insurer. The reason: the state guarantee fund covers the pensioner in case the company goes bankrupt up to a limit of $100,000, so it doesn’t make sense to invest more money with any insurer.