This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

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 TheStreet.com, he is also a weekly contributor on Forbes.com and BankRate.com. His daily market commentary can be read at www.betafundcommentary.com or you can listen to him on www.financialtalkshow.com weekdays at 10:00 AM.
    2 of 2

    Select the service that is right for you!

    COMPARE ALL SERVICES
    Action Alerts PLUS
    Try it NOW

    Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    • Weekly roundups
    TheStreet Quant Ratings
    Try it NOW
    Only $49.95/yr

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    • Upgrade/downgrade alerts
    Stocks Under $10
    Try it NOW

    David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    • Weekly roundups
    Dividend Stock Advisor
    Try it NOW

    Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Alerts when market news affect the portfolio
    • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
    Real Money Pro
    Try it NOW

    All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

    Product Features:
    • Real Money + Doug Kass Plus 15 more Wall Street Pros
    • Intraday commentary & news
    • Ultra-actionable trading ideas
    Options Profits
    Try it NOW

    Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • 100+ monthly options trading ideas
    • Actionable options commentary & news
    • Real-time trading community
    • Options TV
    To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
    Submit an article to us!
    DOW 17,157.98 +126.84 0.74%
    S&P 500 2,001.45 +17.32 0.87%
    NASDAQ 4,552.6340 +33.7320 0.75%

    Brokerage Partners

    Rates from Bankrate.com

    • Mortgage
    • Credit Cards
    • Auto

    Free Newsletters from TheStreet

    My Subscriptions:

    After the Bell

    Before the Bell

    Booyah! Newsletter

    Midday Bell

    TheStreet Top 10 Stories

    Winners & Losers

    Register for Newsletters
    Top Rated Stocks Top Rated Funds Top Rated ETFs