Annuities are fast becoming a booming business, especially the variable annuities where the rates are not fixed but are dependent on the market performance forces. Many of these market performance forces are affected by the stock exchange rates which may at times be unpredictable, especially when we look at a wide range of years. Even, with those that can be termed as financial experts in the stock exchange, who at times get things awfully wrong. This is usually the case when one takes into account major unforeseeable events like a hurricane or a terrorist attack or even the suspicion of one.

Though markets are said to follow the boom and burst trend. Variable annuity rates, which would ultimately determine whether one makes a gain or loses, are closely begged on the trends in the market. The popularity of variable annuities has been on the increase, more so in the two decades.

Popularity of variable annuities  
The mere fact that the variable annuities are gaining popularity does not necessary mean that they are profitable. The reality is that only a small fraction of people signing up for the annuities actually make a kill at the end of the day. Many-a-times, unlike the case of shares or other short-term financial instruments; it is much easier for one to ascertain whether one has actually profited or not. The variable annuities, especially in the case of pension funds; which spreads over decades it is not a straight forward investment decision and may be a bit tricky given that you are comparing amounts received in completely different periods where the value of money has rapidly changed.

Financial expertise
We may not all posses the financial expertise on variable annuities, but in order to have a good understanding; we need to first and foremost understand what they truly are and get the basic facts about variable annuities right first. Many may rush to buy them after the enticing words of the insurance brokers who are hard-bent on convincing you to buy the annuities and make their daily commission.  

The variable annuities is primarily a tax deferred financial instrument that often comes with an insurance or assurance contract that aims to compensate one from the capital losses that may be unforeseen. Governments around the globe have made contributions to these insurance firms, especially the pension funds to encourage people to save up for their retirement years, and relief governments off the responsibility of having to take care of the elderly who are not able to work. This would be quite costly to the tax payers, as they may have to foot the bills.

Though, variable annuities can also be immediate, where one makes a large lump sum contribution and starts to withdraw bite by bite. When the payments are said to be deferred, the contribution would grow at a compounded interest rate over a certain period. Then, the withdrawal time comes, which may be retirement age or an event that triggers the withdrawal as per the insurance agreement.

Fees
One of the things to watch is the fee that is charged, many of the contracts would have these in very fine print. Many people tend to read the benefits and ignore the fine print which spells out the fines properly. It is estimated that the fees would compromise less than 3% of the assets. Though, charges would usually go beyond and include contract fees and commissions and the like. It is important that one properly understands the fee that one would be charged, totally regardless of what names they would be using.

Death
There are variable annuities, in which one is guaranteed a certain amount of money after death, to their next-of-kin or beneficiaries. With these annuities, the beneficiary would be paid a lump sum depending on the interest accumulated. Some would pay the signatory to the annuity when they approach a certain age, say 75 years. For those that died a month after signing the contract; financially they benefit a great deal, considering that all the annuities have a standard death benefit. But, the question is, what proportion actually dies shortly after signing a contract? My guess would be less than half a percent.
Early withdrawal

One may sign up for a variable annuity contract with an insurance firm, and due to circumstances beyond their control, they opt to opt-out and recover their money. The problem then, is they would be heavily charged. The earlier one wants to make an early withdrawal, the heavier the charge and also a tax penalty because you were not initially charged any tax.  Though the tax exempt is a bit controversial, given that when you withdraw or when your beneficiary makes the withdrawal, they would have to pay all the accumulated taxes that were said to be exempted.

It is important that one takes all the factors pertaining to variable annuities in consideration, by consulting with at least more than two insurance agents and looking keenly at the available options available in the market before rushing to make that decision. The quality of any decision made is based on the information that we have.