3 Tips for Choosing Your Variable Annuity

One of the most popular types of investments that is commonly used for retirement planning is the variable annuity. A variable annuity is designed to provide you with a monthly payment for an extended period of time once you retire. Here are a few tips for choosing the right variable annuity for you.

1. Look at the Investments

Although fixed annuities handle all of the investment decisions for you, variable annuities allow you to make your own individual investment choices. This means that you are going to need to understand what investments are available to choose from before signing up for the annuity. Each variable annuity is going to have a different selection of investments. If you are more comfortable putting your retirement money into a certain type of investment, you want to make sure that this particular investment is available in your variable annuity. The information that your insurance agent provides you about the annuity should have details about all of the individual investments that are available.

2. Understand the Death Benefit

Most variable annuities will have some type of death benefit. If you die, your loved ones should be able to receive part of the money that you have paid into the annuity. Each annuity product is going to have a slightly different death benefit and it is important that you understand how it works. For example, one annuity might continue making payments for 10 years after the annuity starts, regardless of whether you are alive or not. This means that your beneficiaries would be able to take over your annuity payments for the next several years once you die. Another type of death benefit might provide your beneficiaries with a lump sum once you die. If you want to ensure that your beneficiaries are taken care of, you need to make sure that you understand how the death benefit works before selecting a variable annuity.

3. Financial Strength

When you purchase a variable annuity, you will be buying a product from an insurance company. This means that you will be giving a large portion of your retirement savings to an insurance provider. Because of this, you need to make sure that you are working with one of the strongest insurance companies in the industry. There are many different insurance companies out there for you to choose from. Some of them will most likely be out of business when you are ready to retire. If you choose the wrong company and they go out of business, your retirement money might go with them. Do some research on the company that you are considering purchasing a variable annuity from. Check out financial strength ratings and make sure that you are dealing with a company that is rated as an "A" or "A+." Dealing with a company that has a lower rating can be risky.

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