Fixed AnnuitiesThe insurance company also guarantees that the periodic payments will be a guaranteed amount per dollar in your account. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetimes of you and your spouse.
Equity-Indexed AnnuitiesWith an equity-indexed annuity, during the accumulation period, when you make either a lump payment or a series of payments, you are credited with a return that is based on changes in an equity index, such as the S&P 500. The provider typically guarantees a minimum return, the rates of which vary. After the accumulation period, the insurance company will make periodic payments to you under the terms of your contract, unless you choose to receive your contract value in a lump sum. The most obvious advantage of equity-index annuities is the guaranteed minimum annual return. This safety net has led at least one analyst to call equity-indexed annuities a "variable annuity with training wheels."
Variable Life InsuranceVariable life insurance gives you the ability to invest the cash value of your policy into various mutual fund subaccounts offered by the insurance company. This can allow your cash value to grow more quickly so that your insurance policy can be paid up sooner. You can usually switch your investment between funds with a phone call (typically limited to 12 free trades per year). And because you are using subaccounts, the cash value of your policy is not at risk in the event of a failure. The life insurance portion, however, is. But remember: A variable life policy is a life insurance policy -- not a retirement savings vehicle like annuities. Therefore, the overall costs are going to be higher in order to pay for the insurance coverage you have purchased.
Variable Universal Life InsuranceThis allows you to vary the amount of your annual premium contribution or suspend it altogether. As a result, the cash value and amount of insurance coverage will fluctuate, depending on the adequacy of your premium payments.
Depending on your level of stock market expertise and risk tolerance, you may find variable annuities to be just the thing. And if the concept of variable annuity investing sounds attractive but you lack the time or inclination to get personally involved, you may want to consider hiring a financial planner or money manager to handle things for you. If variable annuities sound too risky, a fixed annuity or equity-indexed annuity will probably suit you better. Just don't forget to periodically monitor the financial safety of the issuing insurance company. Otherwise, you're taking unnecessary chances with your retirement nest egg. Whatever you do, always shop around and compare one investment to another. There's absolutely no reason to incur high costs or suffer with poor returns when there are plenty of good alternatives out there.