Variable annuities are complex insurance products — so complex that what people actually buy and what they think they’re buying may be quite different. Those misunderstandings can end up costing them, or their heirs, a lot of money.
For the uninitiated: Variable annuities are insurance company contracts that allow people to invest money in a tax-deferred account for retirement. Returns can vary according to how the investments perform (that’s the “variable” in “variable annuity”). These contracts typically include death benefits guaranteeing your heirs will get the amount you’ve invested, and perhaps more. Many variable annuities also have living benefits, which guarantee the amount you can withdraw during your lifetime. In my latest for the Associated Press, how all these guarantees come at a cost, which can make variable annuities expensive to own.