Variable annuities and variable life insurance plans are considered long term, liquid, investments. For individuals seeking an addition to the retirement portfolio, variable annuities and variable life insurance plans provide an investment with a stable return. In terms of retirement planning, understanding the difference between a variable annuity and a variable life insurance plan, and the advantages as part of retirement, will provide for better education of those seeking to boost the retirement portfolio later in life.
With tax deferred earnings, variable annuities and variable life insurance plans provide for a tax free option for accumulating funds into retirement. Making a one time variable annuity payment will ensure a regular monthly income into retirement. Under a variable annuity, monies are deposited into an annuity account with one lump sum paid and allowed to defer and grow until retirement. Conversely, under a variable life insurance plan, premiums are paid on a regular basis. For seniors approaching retirement, annuity investments offer a guaranteed return for income into the later years of life.
Additionally, when purchasing a variable annuity or variable life insurance, investors will suggest purchasing a plan through the 401(k). This option, as a purchase, is not advantageous as the 401(k) is already a tax deferred program. As a selling point, by financial investors, this may be deceiving. Additionally, in response to the market change of the 1990s, many insurance carriers are now offering sub-accounts as an opportunity to further diversify the portfolio of the investor.
In terms of sub accounts, financial consultants widely agree sub accounts should be diversified just as any investment portfolio. Investing in a variable annuity, or variable life insurance, sub account should not be limited to one account option. The ultimate benefit of investment lies in the guaranteed retirement income equal to, and no less than, the premiums paid in or the adjusted benefit amount. In terms of choice of plans, the variable annuity is recommended over the variable life insurance when the investor already owns a life insurance plan.
Under a variable life insurance policy, benefits are liquidated at death, immediately, to the family without requiring the liquidation of other benefits. Life insurance benefits are tax free to the remaining family. An additional advantage to variable life insurance lies in the ability to take out cash withdrawals or loans, against the plan, offering a supplemental income into retirement or for expenses such as college education or medical expenses.