Variable Annuities
Variable annuities now come with an almost endless combination of features, pricing structures and investment options. Carefully selected variable annuities can be excellent investment vehicles when used in the right situations , but numerous options can make an assessment of their suitability for each investor complex. We are able to monitor both the changing product features and the circumstances of each investor in order to provide appropriate guidance.
Expenses - Because they are insurance products with a guaranteed death benefit and, sometimes, a number of other added features, variable annuities typically carry higher annual expenses than comparable investment vehicles such as mutual funds. For this reason, it is important for each investor to assess the value of the additional benefits for their unique situation.
Taxation - One of the most attractive features of an annuity is the deferral of income taxes until withdrawal. It is important to note that, because IRA's and qualified retirement plans already grow on a tax-deferred basis, there is no tax benefit to purchasing an annuity inside one of these plans. Thus, variable annuities would generally not be recommended for use in retirement plans unless other features , such as guaranteed return of principal or guaranteed income benefits, are deemed to be of sufficient value to warrant the higher expenses.
Features - Many variable annuities offer very attractive features, such as enhanced death benefits and a variety of guarantees to investment principal and income. While guarantees are always subject to the claims paying ability of the insurance company, in the right situations, these features can prove very beneficial. It is again important to note that these added benefits usually require higher annual fees. They should thus be evaluated carefully, considering in detail expenses, benefit provisions, and the investor's personal circumstances. Investment Options - Most variable annuities offer a significant number of investment options. Since these ultimately define the investment choices one will make, they should be considered both for the quality of the options as well as the diversity of asset classes available for investment planning purposes as market conditions change.
Accessibility - Withdrawal prior to age 59 ½ will typically result in a 10% tax penalty on any gains in value, and most annuities also have surrender penalties. Consideration should be given to the size and duration of surrender penalties as well as penalty-free withdrawal provisions.