You'll want to compare fees and charges, investment options, death benefits, and annuity payout options. Make a grid with the following questions from the Securities and Exchange Commission. Compare the answers to several variable annuity products and to purchasing mutual funds without the insurance contract.
* Will you use a variable annuity for retirement or another long-term investment goal?
* Do you understand all of the features and choices of a variable annuity? If not, check with a financial adviser such as a financial planner, accountant, or tax expert.
* Do you understand all of the fees and expenses that you will pay if you sign a variable annuity contract?
* Will you keep a variable annuity long enough to avoid paying surrender charges if you have to withdraw money?
* What rate of return can be expected with a variable annuity to compare to mutual funds without insurance wraps?
* How does the financial strength of the insurance company measure up against other companies?
* If you are exchanging one annuity for another one, do the benefits of the exchange outweigh the costs, such as any surrender charges you will have to pay if you withdraw your money before the end of the surrender charge period for the new annuity?
In addition to getting all of these answers, check with a tax adviser and consider the tax consequences of purchasing a variable annuity, including the effect of annuity payments on your tax status in retirement. Additional opinions can help you analyze these very complicated products. Make sure you are buying this product because it makes financial sense for you.
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