Deferred variable annuities:
Right for you?

Deferred variable annuities may be appropriate for certain investors. In general, that's the case if you have already contributed the maximum to other tax-deferred accounts, such as employer-sponsored retirement plans and IRAs, and want to postpone paying tax on additional investment earnings. Similarly, if you're investing for the long term and have liquid accounts you can tap for planned or emergency expenses, you can be fairly confident that you won't need access to the assets in your annuity in the short term.

Know before you buy

As is the case with any investment, you should buy variable annuities only if you understand how they work, what the restrictions are, what the fees are, and what the commissions will amount to. In choosing between different deferred variable annuity contracts, you should also know what their underlying investment options are and how they have performed in the past. While past performance doesn't guarantee future results, it does help you compare one alternative to another.

The commissions, especially, may be less clear with variable annuities than with other investments, such as stocks or front-end load mutual funds since you don't pay them up front, all at once. They're charged as part of your yearly fees and are built in to the cost of the investment. To find out exactly what you're paying in commissions, you might have to ask your sales person directly how he or she is being compensated for variable annuity sales and what the total amount is.