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Variable annuities can be a key part of any comprehensive retirement plan. Since everyone's financial goals are different, you should talk to your insurance agent or financial planner about how a variable annuity can work for you. If you're thinking about purchasing a variable annuity, consider the following:

1. Participate in any retirement savings plan available through your employer. Then determine how much additional savings you can put aside for retirement.
2. Consider the benefits of both fixed and variable annuities. If you are seeking a guaranteed, fixed rate of return, then a fixed annuity might be preferable. If you feel that equities will give you a greater return in the long run and are comfortable with market fluctuations, then consider a variable annuity.
3. Find out what types of funds are offered through a variable annuity and carefully review the prospectus for each. Remember, your savings will be invested in equities, such as stock and bond funds. The annuity's value depends on how well the investments you choose perform, so reviewing prospectuses is important. Review the prospectus regularly while the annuity is in the accumulation phase.
4. Make sure you fully understand the variable annuity contract you are considering.
5. Find out what fees are associated with the annuity (variable and fixed) and how they will affect your returns. Not unlike mutual funds, variable annuities have fees associated with them. The fees pay for management of the annuity's funds and for the annuity's unique insurance elements, such as guaranteed lifetime income and death benefits to a beneficiary.
6. Remember: Annuities are a retirement product. Making a withdrawal before 59 1/2 can trigger a 10 percent tax penalty on that amount in addition to ordinary income taxes on earnings. Other penalties, known as surrender charges, also apply to withdrawals of more than 10 percent of the annuity's value. These charges typically range between 6 percent to 10 percent and gradually disappear over a period of time, usually no more than seven years after the annuity is purchased. Take time to understand what your annuity's surrender charges are.
7. Learn about the variety of payout options. If you and your spouse need to supplement your Social Security and pension benefits with a steady stream of income, variable annuities provide a variety of options to consider.
8. Make sure the broker-dealer selling the variable annuity is a registered member of the National Association of Securities Dealers (NASD). Only registered representatives with the NASD can sell variable annuities.
9. Ask the representative if you have a "free-look" period to review your annuity contract and make sure you have made the right purchase.