Variable Annuity Comparison

Annuities get their tax deferred status by being an insurance product.

As a result the company that issues them could go under then you are out your money. In my state they are insured by the state but you might end up with only getting a portion of your money back with a failure.

Until recently most people didn’t concern themselves much with bank or insurance company failures. But today is a different time.

Be certain of what they mean by “equity indexed annuity”. Some have a minimum that is not much better than inflation but look out for those also have a cap., a maximum that they pay. So you really don’t get the full benefit of the equity risk either.

That said I really dislike annuities. They pay the highest commissions of ANY financial instrument to the agent so they sell them hard. I tell people if anybody recommends annuities they should dump that person as advisor because they are looking to stuff THEIR pockets, not yours. They get payments every year you own them too, just like residuals for people selling other insurance.

Those commissions come out of your return so annuities provide some of the lowest returns. The “equity indexed annuity” is an attempt to hide that criticism.

My reading says the tax deferral with the low return is not a benefit to anybody that has less than $100,000 in annual taxable income. So if you make less than that they are not a good deal for anybody.

I’ll say again. Watch out for anybody that is trying to sell you annuities.

There are better investments, better ways to invest, even with relatively high safety. Like a bond ladder.

Good Luck.