With Immediate Variable Annuities, you pay a lump sum to an insurance company and immediately start receiving monthly payments. Even though payments may go up or down, depending on the performance of your investment, Immediate Variable annuities are designed to provide income that can rise over time to help you keep pace with inflation.
You can be guaranteed lifetime income and a death benefit paid to your beneficiary when you die.
Under the right circumstances, immediate variable annuities can be a more attractive option than immediate fixed annuities because you aren't stuck receiving the same amount of cash each month.
If your investments perform well, you can receive a bigger check each month beating the cost of inflation.
Some of the benefits of Immediate Annuities are: guaranteed income, the chance to earn money in the stock market and a death benefit. The more guaranteed benefits you add to your VA contract, the higher the charges may be. The fees for immediate VAs vary by company, but the average expense ratio is 1.92 percent as of March 8, according to Morningstar, Inc., an independent investment research company.
Most investors should consider annuity products only after they have made maximum contributions to their 401(k)s and other pre-tax retirement plans, according to the Financial Industry Regulatory Authority. Other before-tax retirement plans, such as 401(k)s, not only let you defer taxes on investment gains, but also allow you to reduce your current taxable income.
Though other options may be cheaper, they are not as secure. Immediate variable annuities guarantee lifetime income, whereas IRAs or 401(k)s do not.
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