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A variable annuity is usually very popular because of its potential benefits and despite its perceived risks. However, there are certain tips that the investor can follow that will help them to minimize the risk as well as increase the chances of better returns on their investment.

The first tip is to purchase a variable annuity that is supposed to help you achieve a long term goal or that is supposed to provide income after retirement not for other uses such as going for a trip. It is important to consider why you are investing in a variable annuity because if you withdraw the funds before time you will be charged a fee by the insurance company.

It is important to realize that the option for withdrawing funds before the set time comes with penalties. Therefore, the second tip is to ensure that you have enough funds to support you before you retire so that you will not be forced to withdraw the funds. Apart from paying the fees for early withdrawals, you will also lose as the money that you withdraw could have continued to accumulate without paying any tax.

The third tip is to ensure that you are familiar with all the points in a variable annuity including any loopholes and pitfalls. It is important to read the prospectus carefully as it will define the charges as well as the payments that you will receive.

It is important to use the help of a professional who can be able to calculate for you any of the charges as well as potential payments as this may help you to decide on how you should invest in order to get the best returns. Professionals sometimes understand the market best. Since payment is linked to the performance of your sub-accounts, you may need to seek advice from such professionals on where exactly you should invest.

It is important to note that the investor will get what they pay for. Therefore, if they want to get good returns they should be willing to remove some cash as well. If the investor does not allocate their funds because they are afraid of the risk of losing, then they also risk losing on the chance to make money in case their investments options perform well.

It is important for you as the investor to do your part before purchasing a variable annuity from a particular insurance company. There are so many agencies which rank insurance companies according to their strength in order to determine whether they will be able to serve you in the long run. A potential investor should look for such rankings and evaluate them before deciding on the best insurance company to purchase a variable annuity from. This is the only way they will be able to guarantee a return on their investment when it is time for the payout phase.

A variable annuity can be quite profitable. If the individual follows the above tips, then they are more likely to benefit from these types of annuities.