Pro and Cons of Variable Annuities – Defined With A Real Perspective

Variable annuity refers to a contract in which minimum payment is guaranteed to the holder at the climax of accumulation stage. The insurance company gives the remaining payments with reference to the holders managed portfolio. The performance shown by the portfolio determines the amount to be paid to the holder.

Variable annuity should not be taken with a phobia. They work excellently for you at times but at other situations they are totally useless for you. Pros and cons of variable annuities are properly explained further to enlighten your investment knowledge. In order to explain variable annuities some of its very important shining characteristics are discussed below:

a. Death benefit
b. Income
c. Principal
d. Tax deferral
e. Countless contributions

Death benefit makes sure that the heirs of the account owner are empowered to use the property of the account, whereas income can be freely set for future regardless of its current performance. Tax deferral benefits an account owner by cutting short his tax sum as his assets increase. Annuities are better when it comes to their contributions. No specific limit is put on this value. This feature makes it better suited than any other retirement plan.

The cons of variable annuities are:

a. Larger fee
b. Limited investment options
c. Surrender fee
d. Immobility

Many optional privileges in a variable annuity push its total sum of fee to a higher limit. This can be a bit more costing. Though a total of 10 withdrawal from your total amount is allowed within a year but, as your money is tied up with variable product surrender charges so that can be disturbing for some people. Overall restrictions on the use of money due to surrender charges and less options available for investment makes it less credited than other security accounts. So, before opening a variable annuity account make sure you have knowledge about all its pros and cons.

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