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Senior Retirement Tips :: Best Variable Annuities
Best Variable Annuities: The Best Investment Variable Annuities for Retirement Savings
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The best variable annuities are great investments for retirement because of their tax-shelter benefits, but investors should consider them only if they can tie up their assets for at least ten to 15 years.
To learn more about variable annuities and how to choose the best variable annuities, please keep reading.
How Variable Annuities Work
The best variable annuities let you shave your IRS bill by investing in a tax-deferred variable annuity.
Because of these tax savings, variable annuities are a very popular choice for individuals looking to increase their tax-deferred retirement investment gains.
While annuities are designed by life insurance companies - known for indecipherable and hard-to-compare policies - they're not quite as bewildering as they might seem at first glance.
Essentially, variable annuities are basically mutual fund portfolios (disguised as subaccounts) protected by a thin coating of insurance.
These subaccounts are typically run by well-known and high-profile fund companies like Fidelity or Vanguard and they normally require a minimum initial investment of anywhere from $500 to $10,000. Most have the flexibility to add funds whenever you wish and as you see fit.
Where the Tax Savings Come In
The money you invest grows tax deferred until you withdraw it, just as it would in an Individual Retirement Account or 401(k) plan.
When you pull out your cash from the annuity, typically in retirement, you pay ordinary income taxes on any gains plus a 10% penalty on any withdrawals made before age 59 1/2--again, like an IRA or 401(k).
However, there's no limit to how much you can sock away each year in an annuity. You invest after-tax dollars, though, not the pretax money you can stash in a 401(k) nor the tax- deductible contribution you may be able to make with an IRA.
Variable Annuities Aren’t for Everyone
Although the best variables annuities' alluring tax-shelter benefits can make them terrific investments for retirement, don't just take a salesperson's word that they're right for you.
In fact, you shouldn't even think about buying one unless you're willing to lock away your cash for at least 10 to 15 years. Otherwise, the undergrowth of fees that you will face could destroy those highly touted tax breaks.
The typical variable annuity lets you divvy up your money among seven or more subaccounts that include a wide range of asset classes, such as domestic and international stocks and government and corporate bonds.
If you are a hands-off investor, you can set an initial allocation and then leave your account untouched.
If you prefer switching your money around among the annuity's subaccounts, you can do so without having to pay taxes on any capital gains you generate. By contrast, switch from one mutual fund to another, and you could owe taxes.
You can't talk about variable annuities without discussing their fees, fees and more fees. Even the best variable annuities can carry hefty service charges so look for annuities that combine solid returns with low fees.
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SeniorRetireTips.com :: Best Variable Annuities