Some of the most sought after retirement income products are deferred variable annuities. They are particularly attractive to people who have fairly sizable sums to invest and who are pursuing a fairly aggressive investment program in their latter years. Even though the yield is not guaranteed they have the tendency to return investors a higher profit on their investment than other types of annuities…like fixed annuities.
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You accumulate the principal for your deferred variable annuity over a period of time by depositing money into the plan at intervals or in one lump sum. Your money is invested in stocks, bonds or in a money market fund. Any earnings are tax deferred during the accumulation period. You pay capital gains taxes on your profit.
As this plan is usually offered by an insurance company there is a minimal guaranteed death benefit built into the plan.
It is not usually recommended for younger people as it is advisable that they take advantage of IRA or 401(k) plans offered by the companies where they are employed before they consider this type of annuity.
These plans are sold only by prospectus and the agent must have an NASD licence. Read the prospectus very carefully before investing your money.
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