On the surface, variable annuities often look like a great investment. What’s better than a savings tool, with no income restrictions limiting deposits, growing tax-deferred until retirement? Because they rely on stock market growth for high potential earnings, variable annuities can show impressive yields when held over a period of time that features heavy market growth. Variable annuities can also offer living and death benefits, protecting your investment in case of your death. However, a fact about variable annuities that is not so evident is the average fees for variable annuities, fees that can average 1.35% or more of your assets annually. By cutting into your investment earnings, these fees can negate the reason that you bought the variable annuity in the first place.

Variable annuities also tend to pay high commissions to variable annuity salespeople, hence higher fees. Some salespeople have been accused of using questionable sales tactics, or high-pressure selling techniques to seal the deal. Other people have accused salespeople of pushing variable annuities onto people who are too old or have too short of an investment time horizon to fully benefit from them. The Securities and Exchange Commission has received complaints from consumers describing the tricks that have been used to bully some into purchasing an unsuitable variable annuity.

Variable annuities can be valuable investments for people with a high net worth and/or a lengthy investment time horizon. Other tax-deferred accounts, such as 401ks and Roth and traditional IRAs, are typically a superior choice for middle class Americans. Once you’ve maximized these retirement accounts, a fixed-indexed annuity could be a better next step for you, if you are interested in returns tied to a stock market index without the downside risk associated with variable annuities.

Fixed-indexed annuities tie your interest earnings to a particular stock market index, while variable annuities invest your funds directly in the stock market, via a series of sub-accounts. With a fixed-indexed annuity, interest is calculated by comparing snapshots of the market index’s value on certain dates. Your annuity agent will be able to explain crediting methods more thoroughly to you.

Fixed-indexed annuities offer the same tax-deferred benefits as variable annuities, and even pay a minimum guaranteed interest rate in the case of the market’s sustained downturn. With a variable annuity, you can lose your earnings and even a portion of your original deposit. If you’d like to learn more about the benefits of a fixed-indexed annuity over variable annuities, contact the BuyAnnuitiesOnline.com Specialists at 1-800-994-3023.