Matthew Blume, CFA and Bill Pekin, CFA

Variable annuities are highly complex financial instruments that, despite their popularity, appear to be unsuitable for most investors. While these vehicles offer various theoretical guarantees that may appear attractive to certain investors, the exorbitant costs, poor liquidity, and potentially low returns offered by variable annuities raise questions about their appropriateness for many investors. In this Navigator, we will explain how variable annuities work and review the arguments both for and, more importantly in our estimation, against owning such instruments.

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