Pros And Cons Of Variable Annuity

If you are a regular reader of my blog then you might know that I am a big fan of variable annuities. There are many advantages of variable annuities which makes it the most popular investment product. But there are a lot of cons too which makes it difficult for the investors to choose between them.

So, here is the list of pros and cons of variable annuities.

Pros of Variable Annuities

1. Flexibility

The first thing that attracts us to invest in variable annuity is its flexibility. You can invest in any amount as per your requirement. So, if you have small amount then you can invest in small amount. If you have large amount then you can invest in large amount.

2. Diversification

You will be able to diversify your investments with variable annuities. It will help you to gain more from your investments and to reduce the risk of losing all your money.

3. Low Fee Structure

Variable annuity will charge you a low fee structure. The fees are paid by the insurance company and the company will not charge you anything extra.

4. Investment Options

You will be able to choose from a wide range of investment options. You can choose to invest in mutual funds, stocks, bonds, ETFs and other options.

5. Tax Advantages

Investing in variable annuity is a tax-free investment. You will not have to pay any taxes on the investment amount.

6. No Minimum Balance to Invest

You don’t need to have a minimum balance to invest in variable annuities. You can invest even if you have very small amount.

Cons of Variable Annuities

1. Variable Annuities Have a High Premium

Variable annuities are not cheap products. The premium is charged by the insurance company and it is usually high.

2. Variable Annuities Have A High Contribution

Contribution is the amount that you will need to invest in order to get the benefits of variable annuity. So, if you have a low amount then you will be able to invest only a small amount in variable annuity.

3. Variable Annuities Have No Guarantees

Variable annuity has no guarantee on your investment. If you lose all your money then you will not get anything back.

4. Variable Annuities Have No Tax Advantages

Variable annuity is not tax-free investment. It is a taxable investment. So, you need to pay taxes on the investment amount.

5. Variable Annuities Have A High Exit Fee

If you want to exit the investment then you need to pay a high exit fee.

Conclusion:

So, now you can see that variable annuity is not a bad product. There are a lot of advantages of variable annuity but it has some cons too. So, you must consider both pros and cons before investing in it.