Indexed AnnuitiesIntroducing Indexed Annuities from the
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Variable Annuity - When is it Appropriate?A variable annuity is an annuity contract where the principal is placed into a separate account and invested directly in mutual funds or other equity investments. The owner of the annuity, rather than the insurance company, makes the investment decisions. Because the principal is invested directly in the stock market, there is more volatility: the opportunity for large gains, and the risk of large losses.Before investing in a variable annuity, you should consult with your financial planner. Things to keep in mind: (1) A variable annuity has much more investment risk than a fixed (or even equity-indexed) annuity; (2) Costs and fees are much higher with a variable annuity that with a direct mutual fund; and (2) You can obtain the same tax shelter benefit with an IRA or 401(k). It is very unlikely that you would buy a variable annuity if you still have the option to contribute to your IRA or 401(k).
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