How to Shop for Variable Annuities
October 8, 2019 by Mary Kane
Vanguard’s decision this summer to stop selling its low-fee variable annuity means one less option for investors who like to buy annuities directly, especially ones that are more complex than immediate annuities. You still have plenty of choices when shopping for a variable annuity, but carefully do your homework before locking up your money.
Variable annuities are part investment and part insurance, making them more complicated than some other kinds of annuities. With an immediate annuity, for example, you hand over a lump sum to an insurance company in exchange for a guaranteed monthly check. With a variable annuity, you put your money in mutual-fund-like accounts, and gains are tax-deferred until you withdraw the money or annuitize the account at the end of the contract. The products generally offer income guarantees, typically ranging in cost from 1% to 1.5% of the amount you invest.