4 Factors in Picking a Deferred Variable Annuity

If you are thinking about purchasing a deferred variable annuity, you will want to make sure that you do your homework first. There are many different factors that you will need to consider when picking a deferred variable annuity. Here are some things for you to look at.

1. Choice of Investments

With a deferred variable annuity, you are going to be in charge of choosing your own investments along the way. Therefore, you want to make sure that you choose a variable annuity that has the types of investments that you are comfortable with. If a variable annuity has a very limited selection of investments for you to choose from, this can tie your hands as an investor. Most investors like to have an abundance of choices when it comes to their retirement dollars. Be sure to ask the insurance agent exactly what types of investments you will be able to invest in once you purchase the annuity. You need to be comfortable with the investment choices that they are offering you. Otherwise, the performance of your annuity could potentially suffer.

2. Company Strength

A deferred variable annuity is only going to be as good as the company that issues it. When you purchase an annuity, you are essentially doing business with an insurance company. This means that you want to be sure in choose an insurance company that will be around when you retire. Otherwise, you will have invested substantial amounts of money and none of it will be available when you need it. You need to check on the company's financial ratings before getting involved with them. You should only invest in companies that have a rating of "A" or "A+." Investing in a company with a rating that is anything less than that is irresponsible on your part.

3. Payment Options

You also need to choose a deferred variable annuity that has a payment structure that you are comfortable with. Some annuities will allow you to make a one-time payment in order to purchase them. Other annuities will have a flexible payment plan that allows you to pay for them over an extended period of time. You need to assess your ability to pay for the annuity and then choose one that has the option that you need. For example, many annuities will allow you to make flexible payments on a regular basis. This is a great for those that have irregular incomes and do not want to devote a certain amount of money towards their annuity every month.

4. Duration of Annuity

Another factor that you will need to consider is the duration of the annuity contract. Some annuities will offer you a payment for the rest of your life once you retire. This is great for those that want to make sure that they do not outlive their retirement funds. Others might prefer a shorter contract such as 20 years that will provide them with a larger payment.

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