Variable annuities are growing in popularity with many investors. A lot of investors look at these products as combinations of investments and insurance policies, thus, apparently, making them great ideas – you get money every year, and that amount of money can increase if the investments pay off. And because brokers make a larger commission on variable annuities, many less-than-ethical brokers are happy to push these products.
In reality, however, variable annuities are seldom a good idea for an ordinary investor. Here are some of the reasons you should be quite wary of variable annuities:
- By definition there is a much greater risk with variable annuities. This is a particular problem if you're living on a fixed income or you otherwise need predictability from your investments
- As mentioned above, these products carry much higher commissions
- There are complicated tax implications associated with variable annuities
- Those who sell variable annuities are often not very transparent about the rules and small print of their products
- A variable annuity is not very liquid
We can't say that variable annuities are always a bad idea or that you should never even consider a variable annuity. In some cases, a variable annuity might be a good fit. But these cases are pretty rare.
Exercise common sense and a lot of skepticism if a variable annuity comes up in conversations with your stockbroker. If your broker seems to be pushing a variable annuity hard, even in the face of your reluctance, that's likely a bad sign. And if you're considering a variable annuity, bring it to a financial professional who doesn't sell those products – he or she can give you an objective opinion on the value of the annuity.
If you have been victimized by a variable annuity that was unsuitable for you or if you've suffered a loss of money due to any sort of unethical investment activity, please call Colling Gilbert Wright & Carter today at 1-407-712-7300 for a free consultation.