Variable annuities are investment products typically used for retirement planning. Here are some key points to consider:
1. Investment Options: Variable annuities offer a range of investment options, such as mutual funds, stocks, and bonds. These options allow the annuity holder to potentially benefit from market gains.
2. Tax Deferral: Earnings within a variable annuity grow tax-deferred until they are withdrawn. This can provide potential tax advantages for long-term investors.
3. Fees and Expenses: Variable annuities often come with fees and expenses, including mortality and expense risk charges, administrative fees, and underlying investment management fees. It's important to understand and compare these costs.
4. Guarantees: Some variable annuities offer optional guarantees, such as a guaranteed minimum income benefit (GMIB) or a guaranteed minimum withdrawal benefit (GMWB). These guarantees can provide a level of protection for the annuity holder's retirement income.
5. Risks: As with any investment, variable annuities carry investment risks. The value of the annuity can fluctuate based on the performance of the underlying investments, and there is a potential for loss of principal.
It's important to carefully consider your investment objectives, risk tolerance, and financial situation before deciding if a variable annuity is suitable for your retirement planning. Consulting with a financial advisor or a licensed professional can provide personalized guidance based on your individual circumstances.