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The best variable annuities have low fees relative to expected performance. This is important. It's not just about the fees, but the fees relative to potential returns. A fee of .5 percent is not so great when the profit potential of the funds is only 3 percent. Yet a 3 percent fee on growth funds which might earn 20 percent is a very good deal.
Make sure your variable annuity has a multitude of investment options. This is driven by the insurance company you do business with. An insurance company which owns or manages a brokerage will likely have many funds to choose from. If you have a choice of at least 20 funds, this is a good sign. The more mutual funds for you to invest in, the lower the risk that you'll end up with a bad annuity. If a handful of funds turn out to be duds, then you still have plenty of choices.
Some variable annuities come with a guaranteed accumulation rider. This rider modifies the base policy
contract. The guaranteed accumulation feature offered by the company guarantees that the annuity will increase a certain amount after a set number of years. For example, the insurer will guarantee a 7 percent rate of return each year as long as the annuity is held for 10 years. During this time, the insurer must be the one making the investment choices and you cannot withdraw any money from the contract. These annuities represent some of the best variable annuities to invest in, since they provide a significant benefit to you over fixed return rates without having to worry about investing the money yourself.
Make sure that you are not forced to annuitize your contract after a certain number of years. Forced annuitization means the insurance company forces you to convert your annuity savings to monthly payments. This is not good if you want to keep your annuity as a savings rather than take monthly payments. You cannot get your savings back once the conversion is made. Avoid contracts which force annuitization unless you are absolutely certain you want this option in your contract.