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	How to Choose a Variable Annuity

Introduction

A variable annuity is similar to buying a CD and mutual funds under a tax-sheltered umbrella. Variable annuities came in 1952 and carried heavy fees that offered the investor a minimum return. But today’s annuities are far different from the earlier ones and are a feasible tool for investing. Before choosing a variable annuity you should know the best features for you.

Things Needed

* Prospectus of funds
* Company brochures
* Interior fund Returns

Steps
1 You can go for a deferred or immediate annuity. Not all annuities permit both deferral and immediate annuitization. If you are assured a certain amount per year that you can’t outlive, it is immediate annuitization. Annuitization means you are forfeiting your right to the principal to get a lifetime income.

2 Check the funds from inside. Originally, annuities had mutual funds comprising one fund family. Today the large selections of the funds within annuities are offered from various companies. Find out if there is a good mixture of different kinds of funds when selecting variable annuity.

3 Find out if there is an assured death benefit in a variable annuity. Recent products may assure your survivors don’t get less than the money invested even in case of market fall. Some products even assure the death benefit is at least your principle along with a return on your money.

4 Check if the returns are guaranteed. The terms guarantee and mutual funds are rarely used in the same breath. New variable annuities have features that you can include for a yearly fee, called riders that assure a minimum certain percentage of growth on the principal.

5 Find out withdrawal privileges. Today many allow you to withdraw 10% funds each year. A good annuity lets you withdraw up to 10% without guarantee and between 5-8% in case of guarantee. It is not annuitizing but withdrawal, so the principal still belongs to you. There are guarantees on withdrawals that you can buy.

6 Remember there may be higher fees or higher deferred charges for a bonus up front. At times, the growth of funds and the bonus is more than the fees. Lot of times, the monies are derived from lower commissions to the agents. Find out if there is a bonus product and check if it is better to go for it when selecting a variable annuity.
7 Find out the applicability of surrender charges. A good annuity should not exceed 6-7 years. If you are over 50 go for those without withdrawal rights or limited rights and long surrender charges.

Tips & Warnings

-Withdrawing monies from any annuity before you are 59 ½ years old will mean you have to pay tax on the growth and a 10% penalty unless certain federal rules are adopted.

- If you annuitize a variable annuity, you are assured an income that you can’t outlive, but you also forfeit all rights to the principal you have invested.

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