With the market declines of 2008 and 2009, many investors are now asking themselves whether or not they should think about rolling the money they have in mutual funds and individual retirement accounts into variable annuities.
Annuities, particularly variable annuities, can play an important role in retirement planning.
But buying a variable annuity to protect your retirement savings from market declines may not be the best investment strategy.
With a variable annuity, money is invested in a subaccount of securities.
You receive payments that are based on the performance of the securities in the subaccount.
So if the market declines, the variable annuity is affected in the same way as a mutual fund.
It goes down in value.
Variable annuities often have guarantees that offer some additional security.
However, in many cases buyers don’t understand the guarantees.
Thus, you might not want to move any of your money into a variable annuity without first learning exactly what the guarantee is and what it costs as well as how much you’ll be paying in total fees, including surrender charges.
It is best to consult a professional financial advisor who can help you with this process.