Annuities Vs Mutual Funds

Investors can be sold on the idea that annuities are a safe and secure way to receive income in retirement.

Annuities vs mutual funds. An annuity is an agreement or contract between an insurance company and you promising regular disbursements at a certain period in your life as long as you make a series of amortizations or. Difference Between Annuity Mutual Funds. The reason for this is that their investment performance is dependent upon the underlying portfolio which is typically made up of different mutual funds.

When comparing annuities to mutual funds there are several clear advantages for mutual funds. In a fight of annuity vs mutual fund which is better for a retirement investment. Sometimes they even have very similar names.

A variable annuity provides an investor the flexibility to pursue any investment strategy. On the other hand your returns could be higher or lower with a mutual fund. Expenses on annuities can often be higher than 2 whereas mutual funds can be much lower than 1 especially if you use index funds which can be as low as 010.

Annuities seem to contain mutual funds but these are really sub-accounts a minor technical difference. What they are exactly and why it is important to know the difference between the two. In fact you might lose money depending on market conditions.

Due to lower relative expenses Mutual funds can earn higher returns than annuities. Now lets take a look at annuity vs. Opening Costs and Minimums.

A major difference between mutual funds and annuities is the taxation when held outside a retirement account. You can offset any gain with a loss if you have it the same year. While both products seem similar theyre inherently different and are generally designed for completely different purposes.