Before you put money into a variable annuity, be sure you've educated yourself with regard to the limitations and restrictions that will impact your investment.
Be sure that the company issuing the annuity has a solid financial underpinning—i.e., it will be able to meet its obligations. You want to be sure the company will stand behind your investment over the long term. Check ratings of insurers from services such as AM Best, Moody's, Standard & Poor's, Duff & Phelps, and Weiss Research.
Variable annuities come with several charges that you will be paying—these charges will reduce your return and thus the value of your account. Some common charges include:
So in total, it is not uncommon for variable annuities to come with annual fees. You should pay attention to the total fees you will be paying to make sure that they are reasonable and that you are comfortable with the overall fee structure. However, don't focus on any one fee, but rather, evaluate the total picture, including potential performance.
Also, keep in mind that, subject to certain exceptions including death, you will be assessed a 10% penalty for withdrawal of earnings prior to age 59½. Remember, annuities are meant to be long-term investments.
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