How Do Variable Annuities Work

Some annuities charge a small fortune in fees.

How do variable annuities work. A variable annuity is a type of annuity whose value is tied to the performance of an investment portfolio. The amount of the purchase payments that go into the account may be less than you paid because fees were taken out of the purchase payments. A variable annuity allows the money you put in the annuity to grow at a rate that can change.

That is you no longer have the option to take your money out whenever you want. Variable annuities have payout rates that vary depending on the performance of an investment portfolio. A variable annuity lets you choose from.

The power of tax-deferred variable annuities is the effect of triple-compounding on your retirement plans growth. When you buy a variable annuity either through lump sum or monthly premium payments the payments are invested into sub-accounts. How variable annuities work A variable annuity is part investment part insurance.

You put your money in mutual-fund-like accounts and gains are tax-deferred until you withdraw the money. Those investments have differing rates of investment return and can be stock mutual funds bond mutual funds or any. When you annuitize the policy you lose control of the assets.

Other annuities called fixed annuities offer a steady rate of return or perhaps a rate of return that adjusts for inflation. Variable annuities are financial investments similar to a mutual fund in the sense that issuers can manage annuity funds through stocks an annuitant chooses to invest in. A variable annuity is a tax-deferred insurance product that combines investing and standard annuity benefits.

Variable annuities are tax-deferred vehicles which mean under current tax laws any guaranteed interest rate or gain in an annuity is not taxable until you begin to actually receive this income. This is riskier but also has the potential of paying you more. The amount you receive in payments depends on how much money the portfolio gains or loses.