Top 3 Reasons to Choose a Variable Annuity

If you are looking at annuities as a wealth-building retirement option, you will have to choose between a fixed and a variable annuity. There are some who go for variable annuities that, as they say, offer exponential benefits compared to its fixed counterpart. Annuities are usually looked at by individuals wanting to have their savings and insurance supplemented by a higher- and better-yielding investment.

Variable annuities offer distinct benefits over and above other financial investment vehicles. The top 3 reasons to choose a variable annuity are first, the guaranteed payments; second, the tax deferment; and third, the guaranteed death benefits.

• Guaranteed payments

With life spans being lengthened by improvements in medicine and lifestyles, today’s generation is bound to live longer than its forebears. As such, retirement spans are being extended by decades. There is a possibility that your retirement investments, whether they are savings or annuities or other financial vehicles, will not outlive you. You would not want to live the last 3 years with nothing on your hands, would you? No worry, really, as there are deferred variable annuities that give you the option to be able to get assured payments for the rest of your life, even if you live to be more than a century old!

There are also options to have your variable annuity guarantee the withdrawal annually or monthly of amounts that you choose over a period of years that you stipulate. This, for an additional fee, is added service to guarantee returns on your principal to assure you of the guaranteed withdrawal benefits.

• Tax deferment

On savings deposits and other regular financial services, the interest or income your money earns is subject to income and other taxes withheld. The bottom line here is your money is continually being eroded by the taxes your returns are subjected to. For all you know, you might end up at a loss from your original targeted yields upon retirement.

A variable annuity gives you best value for your money because the taxation angle is deferred until you begin making withdrawals from your principal fund. Then and only then, when you’ve withdrawn, will investment returns begin to be taxed. The earning potential of the fund is thus maximized as the principal amount is not eroded by taxes if those taxes have been collected earlier.

The fund appreciates faster and further this way, with no surprise tax deductions at the end of the year. With this appreciation, a variable annuity is at least able to counter negative inflationary effects. Couple this with sound investment practice, and variable annuities make investment growth even more exponential.

• Guaranteed death benefits

And last but not least, a variable annuity guarantees death benefits for you by providing amounts for your beneficiaries that will approximate the amounts you have originally contributed. Variable annuities options allow for guaranteed payout to beneficiaries should you die before the projected time of payment for your retirement. And your beneficiaries get commensurate amounts probate-free, either equal to, or less prior withdrawals, the amount of your contribution or investment.