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Money Management, Retirement

7 Things to Know About a Variable Annuity

When it comes to saving for the future, there is much concern about how much to invest, what to invest in, and how long to keep an investment. While these are just a few examples of how retirement and saving for the future can be a choice in which much thought is needed, there are some less risky options for spending your money for the future. While there is never any real guarantee when it comes to making money, there are options you can try when it comes to saving for the future. An annuity is a reasonable choice for saving for the future, putting money away for a time when it is needed, and for retirement funds. Listed below are seven things you ought to know about a variable annuity and how it can affect your life.

1. Steady Income.

Every individual who is planning for retirement is definitely thinking about what income they will have and how long it will last. It is unreasonable to expect a large lump sum every single month from social security in your retirement years so having a good source of income is of top priority. An annuity can be a great source of monthly, yearly, or every three months so consider taking a look into how an annuity can work for you. As with any investment you make, you want to make sure that you research your investment option thoroughly, so that you can make an informed decision on the annuity. A financial planner can help steer you in the right direction and can help to assess your financial situation in the long term.

2. Be Wise and Invest Tax-Free.

As a young adult (or adult of any age for that matter), investing is something that makes sense if your financial situation allows at a young age. One of the best reasons to look into a variable annuity is for the tax implications. The variable annuity is an investment in which you put a certain amount of money into the investment, all without paying taxes on it. The great thing is that the annuity compares nicely to the IRA in that you have no limit on how much you invest in every year. If your financial resources allow, you can put in as much as you can, pay no taxes while investing, and be rewarded with the benefits when you retire. Make sure to discuss any questions you may have with a qualified professional so that you can make the best decision for your future.

3. Increased Flexibility with Payments.

There is much concern among people who invest in a variable annuity in that they fear the money put in will never fully be rewarded out to them before they die. This is a legit concern for older individuals; however, the great thing about a variable annuity is that you determine how the payments are made, even after you die. The annuity is capable of being paid out to you or your heirs in the event of your death, but this is something that you would need to set up with your lawyer and tax professional as part of your will.

4. Take Some of your Risk Away.

Ever since the financial crisis seen in the late 2000s, there has been some concern as to how much one should invest, since the risk ever since then has been high. Even though many investors seemingly have been walking on egg shells when it comes to making risks, much of their financial gain has diminished as a result. This is not to say that you should invest all of your savings into something risky, but it does suggest that making gains of around seven percent is within your grasp. With a variable annuity, you can make amazing gains of six or even seven percent every year, and the best part as described before is there is no limit on how much you can invest. This is the benefit of a high risk yield combined with low risk results and the end result is that you have extra income for your golden years. Discuss any questions and concerns you may have with your tax professional or your financial advisor so that you can make informed decisions on your savings future.

5. You Pick the Allotment.

When you make an investment for your future, you certainly want to make the right decision. This is where a variable annuity comes into play. If you invest a certain amount of money to an annuity, you can designate a certain percentage of your annuity to go to a certain investment. For example, the money you invest can be split half and half into a bond fund and the other into a stock fund. If both make returns of ten percent, you will have a great year in returns for that investment. It is similar to that of other investments you may make, but it is great to have a certain designated amount of money coming back to you in return.

6. Swap your Annuity for Zero Tax Fees.

When you make an investment, there are times when you will want to swap what it is you have your money in. When you invest in stocks, you are typically charged a fee, which can range to a flat rate per transaction or a percentage of what you put into the fund. Simply put, this drags the investment down and may cause you to stay in an investment longer than what you desire. However, with an annuity, you have the availability to change you annuity, all tax free. If you simply want to swap in one annuity for something new, then enjoy the rewards of tax-free swapping. Make sure to discuss this with your tax professional before making any changes to your financial future.

7. Bonuses.

Everyone loves the word bonus because it implies more benefits. There are some cases that your variable annuity could offer a bonus. What this means is that some insurance holders offer contracts for your annuity that allow for special bonus credit features. This can be quite rewarding if it works out well, but in some cases, you may be able to gain this bonus credit with the right insurance company. Make sure you discuss this with your financial advisor prior to signing any annuity that allows this because there could be hidden implications. In addition, your tax professional can also be a good source to refer to, so that you can ensure that your tax liability is within reason.

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