Pros & Cons of a Variable Immediate Annuity

If you choose to invest in a variable immediate annuity, you may be able to help secure your retirement financially. With this type of investment, there are several advantages and disadvantages that you should be aware of. Here are some of the pros and cons of a variable immediate annuity.

Pros

One of the biggest advantages of this type of investment is that you will be able to create a regular source of income for yourself immediately. With this type of annuity, as soon as you pay the insurance company a lump sum of money, you will be able to start receiving payments. There is no waiting around on this type of investment to start paying you back.

Another advantage of this type of annuity is that you are not stuck with the same payment every month. If your investments perform well, you could potentially increase the amount of money that you receive on a monthly basis. This provides you with some opportunity to increase the amount of money that you make on a regular basis.

Another good thing about this type of investment is that it has a death benefit. If you die before you are able to receive all of your annuity payments, your beneficiary will be able to receive a payout. Depending on the insurance company and the annuity that you choose, this payment could be in a lump sum or it could be over a long period of time. In some cases, your beneficiary will be able to take over your annuity payment for a certain amount of years.

Cons

This type of investment also has some disadvantages associated with it. One disadvantage is that you are trusting a large portion of your retirement funds to an insurance company all at once. For many, this represents a very risky proposition. You could potentially be giving an insurance company hundreds of thousands of dollars and trusting them to handle your money properly. When you have worked all of your life to accumulate these retirement funds, it can be very difficult to part with them.

Since you are working with an insurance company, there is a chance that they could go out of business. If this happens, you may or may not be able to gain access to your retirement funds again. For many people, this seems riskier than putting your money into a traditional form of investment.

Another disadvantage that you will need to know about is that your payments could decrease over time as well. You are going to be choosing investments for your annuity. If these investments do not perform well, your monthly annuity payment could decrease substantially. If you are relying on this investment to fund your retirement, this can be very stressful. Many people would prefer to invest in a fixed annuity that gives them some type of insurance that they will receive a minimum amount every month.

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