Variable Annuities: Are They Right for Your Retirement Plan?

Many who are planning for retirement choose to invest in variable annuities. While this investment can help some, it is not an investment for everyone. Here are the basics of variable annuities to help you determine whether they are right for you. 

Variable Annuities

A variable annuity is a type of contract that you can complete with an insurance company. With an annuity, you will be paying the insurance company to eventually provide you with regular payments. You could choose to purchase this annuity with a series of payments or with one large payment.

Investments

The thing that makes variable annuities unique is that you will be choosing your own investments. The money that you invest into the annuity will be reinvested into the financial markets. The performance of the annuity is going to depend on how your investments perform.

Phases

With a variable annuity, there are two phases. During the accumulation phase, you pay your premiums into the annuity. In the payout phase, you start collecting payments. Most of the time, the payout phase takes place when an individual chooses to retire.

Consideration

This investment should be chosen only by those who like to be in control of their own investment decisions. This is not the "hands-off" form of investment that other types of annuities are.