Are Variable Annuities the Correct Investment for You?

Variable annuities investments are a popular choice among Americans today. This is because compared to fixed annuities, variable annuities yield bigger returns. But that being the case, is it the right investment for you?

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If you're already 60 years of age or older, investing in variable annuities is far from the best option. Variable annuities have a phase called “accumulation phase,” which takes years to finish. At this stage, investors distribute their purchases to several investment options. They may either invest 20% in mutual bonds, 20% in stocks, and the rest in commodities like gold and oil. This is how the money of investors will grow. It will increase as time passes by, and they cannot withdraw their money during this phase. If they decide to withdraw money in case of emergency, their investments will incur a huge tax penalty. So if you're above the age of 60, variable annuities may not be the best investment choice for you.

If, however, you've started investing in variable annuities at the age of 30 or 40, variable annuity is a great investment vehicle. In the course of 5 years, investments may grow to more than 30%. It may be costly and time-consuming, but the security and returns it offers in the long run are very much worth it.

Making a physical gold or gold-backed stocks investment in variable annuities is a good plan. Gold has a very volatile market, but people invest in the precious yellow metal for its ability to act as hedge when markets go sour. Russia’s president Putin has been on a gold buying spree for several years now, while China’s demand for it is getting bigger every year. Germany also keeps a vast amount of gold reserves for fear of an invasion or high inflation. When Germany decided to repatriate its gold in January 2013, the precious yellow metal’s spot price swung at a very high mark of around $1,660 per ounce. This was because of fear that Germany may have decided to liquidate its reserves to prepare for something big like high market inflation. The precious yellow metal is a good investment not only for diversifying a variable annuity portfolio, but also as hedge to a bearish market.

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Before deciding to invest in variable annuities, make sure that you’re in an age where you will be able to enjoy the returns of your investment after the accumulation phase. If not, then it may be better to choose other forms of investment.

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