More On Variable Annuities Explained

If you are a senior investor who wants to purchase additional investments to help

boost or support your retirement income, you may need products such as variable annuities explained. Knowing what you are getting into with this type of product, as well as options related to this specific type of annuity, will help you make the best possible choice that should come with significant benefits to your retirement income. Here are some basics on variable annuities:

Insurance companies that provide other types of products (such as life insurance for seniors) that help protect wealth and transfer it may also offer variable annuities for purchase. In simpler terms, this kind of annuity is an investment you enter into via an insurance provider, which will then place your money into investments that will help it grow. After your annuity matures, the interest earned by your initial investment (based on pre-determined figures as stated in the annuity agreement) will also be given to you. The agreement is basically a contract between an annuity holder and an insurance company, which allows the buyer to leave his or her money for investment for whatever time frame, and then take withdrawals in installments or as one lump-sum distribution.

Purchasing a variable annuity comes with tax advantages, such as the buyer getting the financial benefits of only paying taxes on the amount or amounts withdrawn. No taxes are required when you put in your initial investment, and no taxes are implemented as your money grows. However, you will have to remember that any withdrawals you make after reaching 59 1/2 years of age will be taxed as income, and any distributions taken earlier than that will come with charges like the sizeable 10% early withdrawal penalty.

Stable insurance providers usually give the annuity holder numerous investment options to help his or her money grow. Investors typically get returns whose amounts depend on the performance of these investments the annuity has bought into. Popular investments insurance providers use for annuities include mutual funds in bonds, stocks, money markets, or a combination of these options of which these are called sub-accounts.

The investment structure of these products allows the buyer increased freedom and financial flexibility, with the ability to move investments around, and rollover profit from a sub-account to another, for starters. In addition, a long-term investment in this kind of product can make the tax deferral benefits larger than the cost of the actual annuity, making it a good investment option for the retiree. If you are deciding on buying into these investments, you may need variable annuities explained; talk to your retirement planner or investment advisor for more information.

by: Katherine Smith

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