Fixed Annuities vs. Variable Annuities

Because annuities are such a popular means of saving for retirement, annuity rates for people living in Seattle are an important issue.  You live in a city where the cost of living is high and if you want to maintain your standard of living after retirement, you will need to manage your money very wisely.  The better rates you get for your annuity, the better your retirement years will be.

If you invest in an annuity that you find is not as competitive now as it was when you purchased it, you are allowed to transfer your annuity to a different qualified annuity account without paying tax on income or investment gains that you would have to pay if you withdrew the money before you reach the age of 59 ½.   Because this is allowed under Section1035 of the U.S. tax code, you do not have to suffer with poor annuity rates that will affect your standard of living after retirement in Seattle.

Annuity rates are not the only issue involved when determining how much you need to invest into an annuity in order to get the return that you need for your retirement.  You will also want to consider whether to get a fixed annuity or a variable annuity.

Many people prefer a fixed annuity that guarantees a certain annuity rate of return over the lifetime of the annuity.    With a fixed annuity, you are guaranteed that you will get whatever payout you agree upon on the outset of the annuity.  The insurance company will invest your premium into a standard investment and you will receive your payout of a guaranteed amount as a lump sum, as large payments over a fixed period of time, or as smaller payments for the rest of your lifetime.

Some people feel they can choose investments better than an insurance company by investing in higher risk ventures.  Variable annuities allow you to split your annuity premium into a bundle of segregated accounts.  You get to choose in to which types of accounts your premium gets invested and a money manager will manage your investments.

Variable annuities have the potential to return payouts at a much higher rate than fixed annuities, but they also carry the risk of returning less than a fixed annuity.  You will incur more fees with a variable annuity than with a fixed annuity because of the need for a money manager, but if your variable annuity performs well, it will be worth the extra management fees, as your payout will be enough to fund your retirement in a high cost of living city such as Seattle.

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