If you want a good choice of options when you invest for retirement, try variable annuities.
Stumped by the term variable annuities? It is not as complex as you might think, but it does take some time to understand the options. To begin with, variable annuities are simply contracts between a customer/investor and an insurance company. The investor makes a series of payments right away once they get started or pays a lump sum.
As an investor you will typically have many options to choose from, and the value of your investment is defined by how the investment options you choose ultimately perform. Those options, in the form of mutual funds, are invested in money market instruments, stocks, bonds or any other advantageous combination. More often than not, investors choose mutual funds, but these annuities are different from mutual funds.
For instance, investing in variable annuities gives the investor episodic payments for the remainder of their lives, and then payments can go to their spouse or another designated beneficiary. This gets rid of the situation where the investor may outlive their assets once they have retired. The annuities also offer death benefits, which means the beneficiary is guaranteed a payment on when the investor passes away.
Another distinct bonus with variable annuities is tax deferral. In other words, there is no payment of taxes on investment gains and income until someone takes money out. The funds may also be transferred back and forth from one option to another without being taxed for the transfer. However, there are deductions if the investor takes money out of the account.
Despite that, the tax rates are lower when compared to capital gain rates. In other words, the tax deferral benefit outweighs the cost of this type of annuity as long as the investor hangs on to it as a long-term investment with the goal of retirement. For long range goals, this kind of annuity is a good idea. Thus, it may not be for those wanting to achieve short-term goals.
Variable annuities are not for everyone, and for this reason it is wise to discuss your needs with a retirement specialist who has your best interests in mind. They know their products and can often recommend precisely what you need, not to mention their advice and expertise is free.
Evan Tunis is with Next Exit Retirement. To learn more about Boca Raton variable annuities or West Palm Beach variable annuities visit http://www.nextexitretirement.com.