There are very few variable annuities that make any sense for an investor. Typically, expenses are high, investments are not the best quality, and management of the investments is somewhat difficult. The investment choices in a variable annuity must be managed just like any investment portfolio. Typically, sellers of variable annuities are not investment managers, and they do not pay attention to what happens to the value of the annuity as the stock market goes up and down. Such a buy-and-hold strategy of passive management is clearly difficult to justify, after analyzing the market volatility that has occurred during the past ten years. There are some annuities that will enhance the investor’s portfolio stability and predictability. Those variable annuities have special riders that provide living benefits to the owner. The living benefits include: ·Guaranteed increase in value for annuitization purposes. ·Guaranteed growth yields of from 5% to 7% annually. ·Regular step-up features that lock in the annuitized values. ·Annual step up features are the norm, but some annuities provide quarterly and even continuous step up features. ·Bonus features. ·Annual withdrawals without incurring penalties. ·Nursing home and terminal illness waivers allowing withdrawals. ·Death benefits that incorporate guarantees and step up features. ·Spousal continuation after death. ·Tax deferred growth ·Generally, annuities are expensive to own. Depending on the insurance guarantees and growth features, these annuities are well worth the additional cost.
Not all annuities are equal. Some are significantly better than others. Because of the complicated nature of the structure of variable annuities and their rider features, it is very important that the buyer of an annuity have a complete understanding of what he or she is buying. This is why it is so important to have a very knowledgeable advisor help with the choice of an annuity. Just as important as this is, it is only a part of the decision matrix in choosing an annuity. Annuities may have a place in your investment portfolio, and then again, they may not be appropriate as an investment for you. To determine if an annuity is right for your investment goals, you need to do a cash flow analysis that looks forward perhaps 30 years, including your retirement years, to determine if a particular investment adds to, or subtracts from, the success of your long term financial plan.
Variable Annuities are Securities that are offered through The Leaders Group, Inc., member FINRA/SIPC, 26 West Dry Creek Circle, Ste. 575, Littleton CO 80120, (303) 797-9080.
High Desert Investment Advisors 4801 Lang NE, Suite 110, Albuquerque NM 505-797-2644 or 505-469-3467
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Information provided herein should not be considered financial advice. Please speak with your investment advisor.
High Desert Investment Advisors may transact business only in states in which it is registered, or in which it is excluded or exempted from registration. High Desert Investment Advisors is currently registered in the State of New Mexico, and has a de minimus exemption to transact business in other states.
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