Why Variable Annuities May Not Be the Best Vehicle for Your Retirement Income Strategy

Josh MellbergAn annuity is a contract you purchase from an insurance company. You provide either a lump sum or series of payments and in return receive payments at a specified date. When you purchase an annuity, you can choose to receive payments for the rest of your life, which can guarantee* income when you retire. Lifetime income** may be available in a base annuity contract or may be available through the purchase of a rider for additional premium. For many seniors, this is an excellent financial income planning tool that helps provides a steady cash flow later in life.

There are a few different types of annuities, and not all have the same level of risk. Compared to purchasing stocks, buying a fixed annuity is a much more conservative bet. The insurance company will return a fixed rate on the annuity for life or a certain number of years. Purchasing a fixed annuity can help increase your retirement income without exposure to market.

What Is A Variable Annuity?
By comparison, a variable annuity is also a contract purchased through an insurance company, but there is generally no guaranteed* rate of return. Instead, the return is directly tied to the market conditions and how the investments you select perform. This provides variable annuity owners the opportunity to receive higher returns on their annuity when the market is doing well, and it also means there is more risk if the market is doing poorly.

Is A Variable Annuity Right For Me?
Insurance companies often sell these products as part of retirement income strategies, but they may not be the right approach for everyone. In general, the older you are, the less likely it is that variable annuities are the best choice for your needs when compared to other annuities. Not only are there higher risks associated with variable annuities, but there are also many additional costs that can lower the return rate. Some of these costs include:

  • Mortality and risk expense
  • Administrative fees
  • Underlying fund fees

If you're seeking a retirement income planning vehicle that will help provide you with a steady stream of income for the rest of your life, there are annuities that can bring you money and financial confidence. At J.D. Mellberg, we offer an array of retirement income strategies that will help you get the most out of your money.

Call today and we’ll put you in touch with a J.D. Mellberg licensed professional in your area.  Just give call us at 1-877-805-0151.


*Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company and are not guaranteed by any bank or the FDIC.

**Some annuities may have a lifetime income guarantee as part of the base policy; others may have riders available that provide this benefit. Riders may also be available for benefits like an annual increase to help combat inflation or for as much as doubling your income in case of a qualifying health event. These annuities are not long-term care and are not substitute for such coverage. Optional riders may be available with a charge.

This article is meant to provide general information on issues that many people consider in making the decision as to whether or not they should buy annuities; and if they do decide to buy, which types of annuities and which annuity benefits and additional riders will best suit their goals and needs. This information is not designed to be a recommendation to buy any specific financial product or service.

By responding to this offer you may be put in touch with a licensed insurance agent regarding retirement income strategies using fixed insurance products. J.D. Mellberg Financial is insurance licensed in all 50 states (AR8771938/CA0K73712/TX1908101) and all producers of J.D. Mellberg Financial have the appropriate licenses for the products they offer.

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