MONEY MATTERS: Variable annuities, pros and cons

Updated: Dec. 8, 2020 at 3:10 PM EST
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COLUMBIA, S.C. (WIS) - Josh Bradley of Capital City Financial Partners continues our discussion this week on annuities as an option in financial planning, more specifically variable annuities.

“A variable annuity is a kind of investment that is tied to the market, hence the name variable. Variable implies your investment can go up with market gains, but it can also go down, and lose money as well, with the market,” said Bradley.

Bradley says one of the biggest benefits of an annuity is tax deferral. This enables you to grow your investment for years without having to pay taxes until you withdraw.

“The other benefit that variable annuities are sold for, sometimes they’re income benefits. This is a guaranteed income that will be paid to you for your lifetime ...,” Bradley said.

However, the Columbia financial planner says the biggest point of concern with variable annuities is the cost.

“Most variable annuities run anywhere from 2 to upwards of over 4 percent a year in fees. That is a lot and that can eat into your returns or what your perceived value of what that annuity is.”

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