The way that a variable annuity has sub accounts that determine the investment performance. When you are buying a variable annuity, you are investing into these sub accounts.

Variable annuities tend to be similar to mutual funds and life insurance. There is a beneficiary set to receive the funds if you are dead. There are also fees that appear similar to the life insurance policies. Here is a list of the fees that you can be looking at for the variable annuities.

 There is a flat rate fee, that is charged yearly for somewhere around $30-$50 dollars per year.
 A surrender charge is another fee that you pay in the instance that you sale your variable annuity early.
 Finally there are mortality and expense fees that are also called risk charges. These are risk charges that are paid to the insurance of the annuities.

Before you invest, it is important to make sure and read the prospectus of the annuity and the sub accounts, because this will show you what the investment objective is. This prospectus will also show you what the investments are that the particular fund buys into.

The variable annuity is a great investment for the long term needs. The benefits of purchasing variable annuities for your future will be:

a. Tax deferred growth
b. No contribution limits unlike an IRA
c. There are death benefits
d. Income security for your family
e. You get the choice of how you want to receive the money
f. There are some annuities that have riders for in the instance that you were to have a major life changing experience you would be able to use the money set into the annuity.

A good way to make sure that the variable annuities are going to be worth the money you pay for them is to make sure to check the insurer's credit rating. The annuities will only be as stable as the company they are issued for.

Due to fees, and taxes, it will take a longer period of time for they're to be a return on the investment in variable annuities. Therefore in order to use the variable annuities for investment purposes, it is necessary for you to plan a long-term investment plan.

The younger you start investing, the better the variable annuities will be for your investment portfolio. The reason is that the variable annuities is good in the long term, however short term, there will not be any real return on the investment.

Based on the amount and how often you make payments into the variable annuity will greatly affect the performance of the investment. Until the time you receive a payout from the annuity, there will be tax deference on the annuity. However the taxes do continue to add up if the annuity is cashed in to early. You are taxed on the growth, not the principal.

There is also a penalty fee that is assigned if the money is with drawn before 59 ½. The penalty fee is 10% of the total annuity.

The overall purchase of a variable annuity is a great plan if you are intending to leave the investment in tact for several years. With that in mind, you can consider the variable annuity a great addition to your investment portfolio, however it may be wise to add a few other types of investments in your portfolio to help with the overall growth of your nest egg.