Annuity Vs Mutual Fund – Which Is Better?


Annuity Vs Mutual Fund Comparison

In a fight of annuity vs mutual fund, which is better for a retirement investment? When it comes to starting an investment for your retirement, gains and losses are not so much the point compared to the kind of moves that you make. Many people will tell you that an annuity is the better option, as mutual funds are much more complicated. However, more often than not, these people will get trying to get you to purchase an annuity from them. The truth of the matter is that when it comes to annuity vs mutual fund, the fund is actually the better choice.

The Truth About Variable Annuities

In the argument of annuity vs mutual fund, a common myth is that all of the money you put into your annuity will benefit you. This is simply not true. While you will be told that you are paying no commission up front, it will be compiled over time through the fees that you will be charged with. If you closely examine the fine print of your contract, you will notice several fees that will start to eat away at your profits. While mutual funds come with fees of their own, there are options available to you that leave you able to enjoy much lower fees. With a tax-advantaged index fund, more of your money will end up actually in your account than in your trusted company's hands.

The One Advantage Of Annuities

Withdrawing money from a mutual fund includes a tax, but as before, it is a lower rate. An increased flexibility in withdrawals will allow you to take money out of your account before the typical age of 59 and a half. And should you pass away with a tax-advantaged fund in your possession, your beneficiary will not be faced with the same kind of taxes that the owner of a variable annuity would. If sold shortly after your passing, the heir would be illegally to receive any taxes at all. The single advantage of an annuity is that investors using more aggressive tactics would be able to bring balance to their portfolios by transferring investments between sub-accounts without worry of extra charges being made on their funds. However, this is not a strategy that many people would employ, as it is typically better to stick with a steady investment than to chase money in a market that is changing every day.

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