Alternatives To A Variable Annuity

1. Portfolio of Index Funds

A portfolio of index mutual funds can provide the same return, have lower expenses, and in several ways provide better tax treatment than a variable annuity.

2. No Load Annuities

If you already own a variable annuity that is not in a retirement account, and you know you will have to pay taxes if you cash it in, you may wish to exchange it for a no-load annuity. This type of exchange (called a 1035 exchange) will not be a taxable event, and by using a no load variable annuity you can often reduce the fees you pay by 1% - 2.5% a year when compared to broker-sold variable annuities.

3. Tax Managed Funds

Tax managed funds are designed to reduce the capital gains, dividend and interest distributions that the fund will pay out each year, thus reducing your annual income taxes when compared to other non-tax managed investment alternatives. For non-retirement accounts, these types of funds provide an attractive alternative to a variable annuity.