| As an amateur investor/advisor I'm always | | | | The Cons |
| looking at the pros and cons of each type of | | | | 1. Irreversible consequences. The idea of income |
| investment. Today, I want to give you my | | | | for life sounds enticing but here are a few cons. |
| thoughts on variable annuities. Before we get | | | | For example, once you invest in your variable |
| started, let me assure that you know the | | | | annuity it often becomes irreversible. You often |
| difference. Fixed annuities are tied to interest | | | | give up the ability to get your lump sum back or |
| rates or indexed annuities tied to various indexes | | | | even pass it to "other beneficiaries". So, choose |
| and variable are tied to the investment | | | | wisely! |
| performance of the mutual funds within the policy. | | | | 2. Locked up until 59 1/2. Another downside is |
| That means you COULD make much more but | | | | that once you put funds into an variable annuity |
| then again, you could make much less too! | | | | you cannot touch those funds until you reach age |
| The Pros: | | | | 59.5. Otherwise you have to pay a 10% penalty |
| 1. Flexibility investment choices - Variable annuities | | | | for early withdrawals. Yuck! |
| have sub-accounts with various mutual funds to | | | | 3. Poor tax planning. A withdrawal from a variable |
| select from. This makes it easy to change | | | | annuity is treated as ordinary income rather than |
| investment direction or your allocations with little | | | | qualifying for the often more favorable long-term |
| or no costs. | | | | capital gains treatment. When you do start to |
| 2. Tax deferral for your investment gains - Just | | | | take funds from the contract, the portion of your |
| like your 401k or IRA, in variable annuities your | | | | payments that are considered investment gains |
| contributions and earnings can grow tax-deferred | | | | are taxed at your ordinary income tax rate |
| until you withdraw funds. If this is in a non-qualified | | | | instead of the long-term capital rates. This rate |
| account (non IRA or retirement), you do not | | | | could be higher than the current capital gains rate. |
| have to make mandatory withdrawals at age 70 | | | | There you have it, variable annuities have both |
| 1/2. | | | | pros and cons and you need to talk to a |
| 3. Income for life - I will concede that no other | | | | professional to find out what is right for your |
| investment allows for the creation of income for | | | | situation. In fact, it's better to get options from |
| life. Once you select monthly payments (or | | | | MULTIPLE professionals to compare rates and |
| annuitize) your annuity contract, the insurance | | | | programs. That is why I've teamed up with a |
| company will guarantee you (and your spouse, | | | | private company that seeks out the best quotes |
| should you desire) the income payment for the | | | | and gives them to you - free of charge. I hope |
| rest of your life. This is like creating your very | | | | you give it a try! |
| own pension! Gotta love that variable annuities pro! | | | | |