To understand and choose the best variable annuities you should first be knowledgeable about variable annuities. A variable annuity may be defined in simple terms as a contract between the insurance company and the insurer (yourself). This contract is based on an agreement by the insurance company to make monthly payments to you; these payments can begin immediately or at a future date. The contract is purchased by the payment of a lump sum amount or through a series of payments.

Variable annuities offer the investor a range of investment choices and the value of your investment will depend on the investment options you choose. These options comprise mostly stocks, bonds, money market instruments or some combination of the three. Though variable annuities are invested in mutual funds they are not to be considered mutual funds because:

1. You receive periodic payments for the rest of your life or your designated beneficiary does.

2. There is a death benefit attached to variable annuities that guarantees that your beneficiary will receive a specified amount in the event of your death.

3. Variable annuities have the advantage of being tax deferred; no income tax is levied on income and investment gains until you actually start withdrawing your money.

One of the biggest financial risks most people face is not volatile market conditions and the loss of savings but longevity. ‘Will you outlive your money?’ has become a burning issue for most people. Preparing for a long and happy retirement life is of great importance and with it comes choosing the best variable annuities to see you safely through.

One type of investment is the immediate annuity plan – you give the insurer an amount of money and the company will pay you an agreed upon amount of money every month for the duration of your life. This is a good scheme provided your insurer stays solvent and is able to make the payments over your life span. If you break the contract you could end up paying a very large penalty, so choose wisely.

When choosing the best variable annuities you need to base your selection on one main principle – the company should be a long standing one of high repute. Insurers should be able to offer you immediate annuity options and have an ‘A’ rating (for financial safety) from Moody’s Standard and Poor’s among others. Make sure the company you choose has ratings from at least 2-3 services that provide the ratings. Then you consider the size of the monthly payouts; women are expected to have a longer life expectancy ratio hence the payouts are smaller for them. You could add inflation riders to your annuities to guarantee yield return but need to be sure it is a good option for you.

One important tip to bear in mind when choosing best variable annuities is not to invest more than $100000 with any one insurer. The reason: the state guaranty fund covers the annuitant in case the company folds up to a limit of $100000, hence it does not make sense to invest more money with any one insurer.