Stock and Bond Alternatives

Mutual Funds
A mutual fund is essentially a financial portfolio. It is monitored and maintained by an investment manager who fills your portfolio with a variety of securities to promote diversification.

An amount of $1,000 or less, depending on the requirements of a mutual fund, is all you need to produce to get started. These financial investment instruments are for the novice and experienced alike.

Unfortunately, there is never a guarantee that you will always come out of the process better than when you started. You are subject to the roller coaster ride that dictates the market.

Variable Universal Life Insurance
You pay premiums with a variable universal life insurance policy, and as a result, you receive a death benefit. This money is tax deferred and is allocated, according to your specifications, among various investment sub-accounts. These sub-accounts consist of securities, including stocks, that increase and decrease in response to market fluctuations.

The contents of a variable universal life insurance policy are not guaranteed. In addition, once you withdraw money from the policy, you are required to pay surrender charges and taxes on amounts exceeding your basis. Any loans or withdrawals cause your sub-accounts to decrease, which means you may be required to replenish the sub-accounts to return to the amount of the policy.

Variable Annuities
In a variable annuity, your premiums are not applied to a general account. The money is placed in a different account, which consists of various sub-accounts. As in the variable universal life insurance policy, you specify the amount of premiums being applied to each sub-account.

Because mutual funds, variable universal life insurance, and variable annuities are geared toward providing income for retirement, these financial planning instruments are potentially subject to a 10% early withdrawal penalty fee if your age is less than 59 1/2 and surrender fees on top of income taxes.

Please ensure that you diligently read the prospectus, which accompanies annuities. This gives you a clear idea of the factors (objectives, expenses, and risks) involved with the funds themselves. A financial professional can better explain the details.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

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