The Real Truth About Variable Annuities
"One of the most misunderstood investment strategies I've come across over the past 25 years is the variable annuity," writes Investment Adviser Representative Craig Kirsner in a recent column on Kiplinger.com. I agree with that statement. But not for the same reasons.
As a longtime insurance professional and former chief legal counsel for Charles Schwab, I've seen annuities bashed for many reasons -- occasionally valid, but more often than not because they are just plain misunderstood.
Variable annuities have come a long way. Years ago it wasn't unusual to see expensive, commission-laden products that sometimes made too-big promises. But that was then, this is now: Today's variable annuities are leaner, meaner, more liquid, more cost effective and more transparent.
So, it's time to update consumers on their progress and debunk some of the bad old myths.
How They Do What They Do
Variable annuities are just one piece of the retirement puzzle. They work by allowing annuity owners to invest in mutual-fund-like subaccounts called Variable Insurance Trusts, while deferring taxes on the gains in those investments. Bear in mind that these investment options may share a name with their retail mutual fund counterparts, but are completely separate, and their performance,
