Variable Annuities: Understanding Your Investment Choices

Variable annuities can provide you with a way to receive a regular income once you retire. This type of annuity is different from other annuities in that you are able to make your own investment choices. Here are a few things to consider about understanding your investment choices with variable annuities.

Variable Annuity Investments

With the money that you pay the insurance company for your annuity, you will be able to invest a portion of that. Many annuities take care of the investments for you, but with a variable annuity, you will make all the decisions yourself. You will have a group of investments that you can choose from to allocate your money to. The amount of money that you have available to you once the payout phase begins will be determined by the quality of investments that you choose. This means that you need to put an emphasis on understanding your investment choices and choosing investments that will perform well. The burden of creating retirement funds to live off of is entirely up to you with this type of annuity.

Reading the Prospectus

In order to determine what investments are available to you with a variable annuity, you will need to get a copy of the annuity prospectus. This is a document that outlines all of the details about the annuity that you are investing in. It will have financial information as well as information about information about the fee structure of the annuity. The prospectus will also outline all of the available investment choices that you have. You should closely read the prospectus to make sure that you understand the investment options in front of you. 

Looking at Options

You will want to closely examine each investment choices that is available to you. Many of these annuities will offer a variety of different mutual funds for you to choose from. You need to look at the past performance of the mutual fund and determine if it looks like a worthy investment. Be sure to read about the investment strategy of the fund to see what types of investments they typically make. Many mutual funds will invest in a variety of stocks, bonds, or money market instruments. You want to make sure to choose a mutual fund that fits your individual investment goals. For example, if you would prefer to create growth in your portfolio, you might want to choose an equity fund that invests solely in stocks. If you would like to create a regular income for the portfolio, investing in a bond fund might make more sense.

Changing Investments

One of the benefits of investing in a variable annuity is that you can easily change investments in the future. If you decide that you want to move your assets from a bond fund to an equity fund, you will be able to do so without creating any tax liability to worry about.



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