Variable annuities can offer some benefits, according to the U.S. Securities and Exchange Commission. For example, these annuities make it possible to receive regular payments throughout the rest of your life. They also have a death benefit, meaning that if you die before you started receiving payments, your beneficiary can receive a specified amount. Finally, variable annuities are tax-deferred, so you won’t have to pay taxes on income until you withdraw the money.
But in comparison to other mutual fund options, variable annuities can cost 50 percent to 100 percent more in fees and surrender charges, according to Financial Mentor. Further, the gains on these accounts are taxed as normal income — not at the lower capital gains rate — upon withdrawal.
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