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- Variable annuities have strengths, weaknesses
- March 29, 2010 4:04 PM
Annuities are one way to diversify investments or protect assets from creditors. These contracts between consumers and their life insurer can provide guaranteed income in exchange for a lump payment or series of payments. They can also come with hefty commission fees.
A recent report by the Christian Science Monitor weighs some of the pros and cons associated with variable annuities. Unlike fixed annuities, these are regulated by the Securities and Exchange Commission and do not guarantee growth.
Annuities are protected from taxation until they’re withdrawn. While they allow flexibility to select between mutual fund sub-accounts, they do not allow screening for social or moral preferences.
“Your investments may be supporting companies involved in abortion, pornography, embryonic stem cell research, gambling, tobacco, alcohol, or other issues important to you,” the report says.
Funds invested in an annuity may not be touched until you reach age 59 ½. If you do dip into the annuity before that, you would incur a penalty.
A recent provision in the healthcare reform act includes a 3.8 percent tax on investment income, including annuities. Despite efforts from several major life insurance companies to eliminate the tax, it was included in the reconciliation bill passed by the U.S. House of Representatives.
This article was originally published by Life Quotes, Inc.
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