3 Things To Watch Out For With (Variable) Annuities

(don’t forget to checkout the video of this blog too)

💾 be sure to save for later 💾

This is one of the vehicles that truly gives annuities a bad name.

Now there are some times that a variable annuity makes sense, but most of the time, they should be completely avoided.

Annuities are purchased for a variety of reasons….

Maybe it’s guaranteed income (which I’m big proponent of).

Maybe it’s to protect the principal of your retirement asset (also a good idea).

But, the problem is that variable annuities are a VERY inefficient way to accomplish these objectives.

In fact, here are 3 things you really need to watch out for with variable annuities

✅ Principal Protection

If you’re buying an annuity for principal protection and it gets shoved into a variable annuity that might not be the best place for it.

A lot of times variable annuities have the same exposure to market risk as many other investments.

That means that even if your losses are capped (which some are), you still might be subjugating your money to a 10% annual loss…. OR MORE.

✅ Lifetime Income Options

Most people buy annuities for retirement income but a lot of variable annuities don’t have a lifetime income rider.

The lifetime income rider is what GUARANTEES the income will last forever.

So it’s difficult to do any sort of retirement income planning if you don’t have the income guarantee.

✅ Annual Fees

This is the biggest one ☝️

Variable annuities often come with a hefty price tag.

This means the market has to do really well just to outpace the fee drag that you have on these contracts.

And if the market doesn’t do well, the fees only adds insult to injury to the losses you incur in the market.

I’ve run into variable annuities that have 100% market loss exposure, 3.5–4% in annual fees, and have no options for income.

In this scenario, all you have is an expensive investment account with no income guarantees.

So once again, variable annuities often have the riskiness of the market with added insurance expenses, making them a poor choice for protecting principal, providing income, or for growing your money.

Use the market for growth and use the right type of annuity for income.

Let’s chat 💬😎