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August 2008

Home » Best Days » About Variable Annuities

About Variable Annuities

Investors have a variety of ways to save for the
future. Whether it's funding retirement or saving for
big purchases in the long-term, choosing an investment
depends on the length of the investment, budget and
expectations of performance versus the risk involved.
Variable annuities can be a good way to supplement
other retirement plans and guarantee an income stream
in retirement.

A variable annuity is a contract between the purchaser
and an insurance company. In return for premium
payments, the issuer agrees to make regular payments
to the purchaser. Payments can begin immediately or at
a future date.

- Much like a fixed annuity, contributions are made
with after-tax dollars and are not tax-deductible.
Most investors should fund other retirement plans
first, but if you've already contributed the maximum
allowable amount to those plans and want to save more,
an annuity can be a good choice.

- The difference with a variable annuity is that the
purchaser can designate how the premium dollars will
be allocated among the investment choices (often
called subaccounts.) Variable annuities don't offer
any guarantees on the performance of subaccounts.
While there is a greater potential for earnings
growth, there is also greater risk. If subaccounts
perform poorly, you may lose money, including
principal. Consider a variable annuity only if you're
willing to assume the risk inherent in investing.

- There are two phases of annuity: accumulation and
distribution. During the accumulation phase you can
pay premiums in one lump sum or a series of payments
over time. During the distribution phase the investor
can withdraw some or all of the money in a lump sum or
can annuitize. Annuitization provides a guaranteed
income stream for either a specified period or for
life.

- Annuities are designed for long-term investing.
Usually there is a penalty for early withdrawal, so be
certain you won't need the investment until age 59
1/2.


With offices in New York and Savannah, Barbara
Treadwell has more than 20 years of experience in the
financial arena. A Certified Financial Planner,
Treadwell embraces the LEAP Systems principals of
coordinating and integrating assets for improved rates
of return, tax savings and better protection against
the eroders of wealth.

For more information, visit
www.treadwellassociates.com or call (800) 695-6007.