What’s the difference between fixed and variable annuities?
Fixed annuities carry a fixed rate of savings with the insurance company. The rate is usually very low and the expenses are usually very high. Fixed annuities require you to leave the money alone for usually 5 to 10 years, with a declining penalty for taking the money out early. If the money is taken out prior to age 59 and a half, you will also be hit with a 10 percent penalty from the IRS for early withdrawal. Dave doesn’t recommend these. Variable annuities invest your money into various types of securities, usually mutual funds. Benefits include the tax deferral of the growth mentioned above and usually allow you to invest in different fund families within the variable annuity. The key to successfully investing in variable annuities is priority and understanding what you are agreeing to and paying for. Variable annuities are often utilized too early or unnecessarily. Remember, the primary benefit of variable annuities is the tax deferred growth. But if you have available a 401K, 40
