Variable Annuity

As the name indicates, the principal (premium) in this type of annuity can fluctuate up and down.  Careful consideration must be taken as to how much risk an investor wishes to take. Variable annuities can fall just as quickly as equities, or mutual funds. No guarantees to the actual principal are offered.  Investors should become aware of the fees for both the fixed and variable portions of a variable annuity.  NOTE: This does NOT offer protection or guarantee of the principal.

From FINRA’s website, http://www.finra.orgInvesting in a variable annuity within a tax-deferred account, such as an individual retirement account (IRA) may not be a good idea. Since IRAs are already tax-advantaged, a variable annuity will provide no additional tax savings. It will, however, increase the expense of the IRA, while generating fees and commissions for the broker or

Variable Annuity Riders

GMIB – Guaranteed Minimum Income Benefit rider can be added to some variable annuities.  This provides income at some point in the future. This usually requires annuitization, which means you lose control of your money.  NOTE: This does NOT offer protection or guarantee of the principal.

GMWB – Guaranteed Minimum Withdrawal Benefit rider can be added to some variable annuities.  This appears to be a more flexible cousin of the GMIB.  The distinction here is that you get to withdraw money without annuitization – thus possibly maintaining more control.  NOTE: This does NOT offer protection or guarantee of the principal.