A Variable Annuity trades the stability of a fixed annuity rate for the potential of a greater return on your investment. Variable annuities give you the option of investing your money in various areas, such as the stock market, bonds and money markets, to fund your annuity. Your money is not guaranteed, so it is important that the investments are made carefully. If your funding options perform well, the return on your investment will likely be better than a fixed rate annuity. If they do not perform well, however, your annuity’s earnings, or even some of the principal, can be lost.
Some variable annuities are flexible while still allowing you some of the security of fixed annuities. You can apportion your investment among a lower risk fixed component and higher risk funding vehicles (i.e. stocks) in a single annuity.
Most variable annuities are paid into over time rather than making a one-time investment.
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