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Tips for investing in a Variable Annuity

You can actually benefit a lot from Variable Annuity if you know the right steps to take. You can as well lose your hard earned money if you invest in the plan without proper guidance. Among the various kinds of annuities meant for retirement purposes, Variable Annuity is known for its viability. You can succeed in using it to raise steady means of income when you retire.

Actually, there are some risks involved in Variable Annuity. You need to be well informed about them.  For instance, there’s a risk of having loss if your investment is decreasing on regular basis. There’s also the risk of paying several charges both the known and the unknown ones. You need to know the right steps to take in order to benefit more from the investment opportunity. The following tips can be of help to you.

•             Budget well before you invest

You need to budget your cash expenses well before you think of investing in a Variable Annuity. There’s no need to invest in the plan with the cash you’ll need in the near future.  It’s always better to use the money you won’t like to touch for years when thinking of making the investment.

•             Diversify Your Investment

To gain more from Variable Annuity, you need to diversify your investment portfolio.  You have the opportunity to invest in the US stock, international stock, bonds and mutual funds.  You need to divide your investment among the various options.  This will help you never to lose your money if one of the investment options begins to decline in the economy market.  If you invest in one option, there’s the possibility of losing everything if the market keeps decreasing.

•             Consider the charges involved

You need to make inquiries about management fees, surrender charges and other extra charges that may be involved when you go for Variable Annuity. Oftentimes the insurance company may charge a management fee of 1% to 2%. You may also be charged a 10% tax penalty on the surrender charges when you want to withdraw.  You need to know more about these charges before you make your choice.  Try and also find out if your insurer has hidden charges or not.

•             Invest in Options that interests you only

You need to check    the annuity prospectus of the insurer in order to discover various investment options that are available. When you locate them, do well to invest in the options that interest you.

•             Consider going for deferred variable annuity

Deferred variable annuity pays better since it gives you the opportunity of leaving your investment for a long period of time.  In most cases, you won’t pay any tax on your income returns until you’re set to make cash withdrawals at a future date. Deferred variable annuity also gives you the opportunity of investing with a small capital. You’ll then watch the investment grow as the years roll by.

In all, there are other details you still need to know about Variable Annuity. There’s always the need to engage the services of an insurance agent or a financial adviser to help you out.