Best Annuities of

How We Chose the Best Annuities 

Compared to other types of annuities, variable annuities provide greater growth potential since they allow you to take advantage of the stock market by investing your premiums into a selection of market-based assets, which are subject to market fluctuations. In exchange for the potential for higher returns, variable annuities also carry a higher risk since your principal is not protected from market losses either. 

That said, variable annuities are an attractive investment option for people who want the benefits often associated with other types of annuities, like tax-deferred growth, a steady source of lifetime income and death benefits, but are more risk-tolerant and patient in order to see those greater rewards. 

Since variable annuities have a reputation for being complicated and sometimes confusing, we’re here to break down the most important things you need to consider before narrowing down your options, which we also used to guide our top recommendations:

Fees & Penalties 

Variable annuities are known to have a variety of added fees, including mortality and expense fees, administrative fees and fund management fees that can significantly reduce returns. Insurers may offer multiple types of variable annuities, so it’s important to fully understand the different fees associated with each, plus compare total annual costs per provider. And since variable annuities are meant to be used for retirement or long-term savings, you’ll need to pay special attention to surrender charges, which are penalties for withdrawing funds early during the surrender period (typically between three to 10 years). 

Investment Options 

Variable annuities are unique from other types of annuities because they allow you to invest in a way that takes advantage of the stock market through a preselected group of sub-accounts, typically mutual funds, each with its own investment strategy and risk. These sub-accounts can be spread out over various asset classes, including stocks, bonds and money market instruments, allowing for uncapped growth potential. Many insurers, including those on our list, allow you to choose which sub-accounts you want to invest in based on your personal goals, timeline and risk tolerance—or they can provide professional recommendations from financial advisors if that’s your preference.

Riders and Optional Benefits 

Riders are essentially optional enhancements, like added protections or guarantees, that you can add on to your variable annuity contract for an extra cost. Living benefit riders, like a guaranteed lifetime withdrawal benefit, help create a steady stream of income for you (or a spouse) regardless of market performance. Death benefit riders help ensure the agreed upon payout will transfer to the beneficiaries, or surviving spouse, in the case of the owner’s passing. While riders allow you to customize a variable annuity contract to suit your specific needs, you’ll need to carefully consider the terms and cost implications. 

Insurer Reputation

Since variable annuities are backed by the insurer, it’s extremely important to work with a company who has an established history and high credit ratings as well as positive customer feedback. Check third-party agencies, like A.M Best, Moody’s or Standard & Poor’s, which rate the financial strength of insurance agencies to provide insight into the company’s ability to satisfy their policyholders. 

Liquidity & Withdrawals 

Variable annuities are meant for retirement or long-term investments, which means they often charge withdrawal penalties for distributions that are taken early or during the surrender period. Some insurers will allow you to withdraw a certain percentage of your account (like 10 percent) fee-free, while others even offer certain withdrawal exceptions for hardships or other life events. Variable annuities are often used to create guaranteed income payments long after retirement, and can come with significant fees or taxes for early or large withdrawals. 

Tax Implications 

Like other annuities, variable annuities offer tax-deferred growth, which means you’re not responsible for paying taxes on any gains until you make a withdrawal, begin receiving payments or a death benefit is paid. ​​This may allow for higher growth from compounded earnings without the impact of annual taxes. When you do eventually take withdrawals, you’ll be responsible for paying normal income tax on the earnings. It’s important to note that for withdrawals before the age of 59½, the IRS will impose a 10 percent tax penalty on top of any taxes due. 

Contract Terms 

The terms of a variable annuity will differ with each insurer, so be sure to shop around and pay close attention to any management fees and how long surrender charges apply, limits on withdrawals, plus how optional benefits like income guarantees or death benefits are structured and priced. Look for contracts that allow for portfolio rebalancing, future contributions and optional changes to riders or payout terms. It’s always smart to discuss any investment decision with a financial advisor or accountant to ensure you fully understand the contract terms and confirm if this is the right investment for your financial goals. 

Disclosure
Gainbridge products featured on this site—FastBreak™, SteadyPace™, and ParityFlex™—are issued by Gainbridge Life Insurance Company (NAIC #15691), which is licensed in 49 states, the District of Columbia, and Puerto Rico, excluding New York. FastBreak™ is a non–tax-deferred multi-year guaranteed annuity (MYGA), meaning interest earned is taxed annually. Withdrawals of up to 10% of the account value per year are allowed without penalty; however, excess withdrawals may be subject to surrender charges and market value adjustments. SteadyPace™ and ParityFlex™ are tax-deferred MYGAs, where earnings grow tax-deferred until withdrawal. Withdrawals made before age 59½ may incur IRS penalties. ParityFlex™ additionally offers a Guaranteed Lifetime Withdrawal Benefit (GLWB), providing the option for lifelong income, subject to withdrawal limits and surrender charges.

These annuities are not FDIC-insured bank products and their guarantees depend on the claims-paying ability of Gainbridge Life Insurance Company, which may also be subject to coverage by state guaranty associations. Rates, fees, terms, and conditions may change at the discretion of the issuer. Please review Gainbridge’s full legal disclosures here before making any decisions.