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5 Common Mistakes When Buying a Variable Annuity

Mistake No. 4: Not fully understanding portfolio behavior under changing conditions

The insurance company that is offering the variable annuity and its living benefit has taken steps to try to ensure that it is able to meet its future obligations. These steps often involve the ability to restrict investment choices, as well as moving money in or out of the subaccounts you have selected.

It is absolutely critical that you understand how the annuity will behave in various market cycles. You need to know what happens to your asset allocation in market down cycles, as well as any subsequent rallies. Of course, understanding this can be very complex and difficult. At the very least you should make sure that your broker or adviser understands how the annuity will behave.

Mistake No. 5: Working with an adviser who is not a variable annuities expert

Annuities can be helpful tools in the retirement planning process, but they can also fail investors if utilized incorrectly. Ask your broker or adviser how many different annuity providers he or she works with, how long he or she has been working with them and what the selection process is. There are hundreds of choices available, many of which frequently change.

A firm with a dedicated staff to review these changes and keep the advisers or brokers aware of all the changes will, in my opinion, provide better long-term results and reduce the chance of owning an investment that does not behave the way you thought or intended.

Some other common mistakes:
  • Selecting unneeded benefits, unnecessarily adding to the cost of the investment
  • Selecting the wrong registration (individual vs. joint)
  • Ignoring tax loss opportunities from underperforming annuities
  • This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
    Oliver Pursche is President of Gary Goldberg Financial Services, a boutique money management firm located in Suffern, NY. Additionally, Mr. Pursche is the Co-Portfolio Manager for the GMG Defensive Beta Fund, and a Founding Partner of Montebello Partners, llc. In his role as President of GGFS, and as a member of the GGFS Investment Committee, Mr. Pursche helps oversee the investment portfolio of over 2000 clients with over $500 million dollars in assets. Mr. Pursche frequently provides market and economic commentary on CNBC and Fox Business News, as well as often being interviewed by The Financial Times, US News and World Report, Thomson Reuters, Bloomberg Businessweek, and the Associated Press regarding his and the firms views on the latest market news and events. Mr. Pursche's views on the market and investment strategies have been featured in the Wall Street Journal, Investors Business Daily, Smart Money, USA Today and other national business publications. In addition to writing for, he is also a weekly contributor on and His daily market commentary can be read at or you can listen to him on weekdays at 10:00 AM.
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