Variable Annuities

What are Variable Annuities?

Variable annuities consist of investing the beneficiary’s funds in securities such as bonds or stocks. With a variable annuity, the performance of securities will determine the amount of income that the beneficiary will receive.

Variable Annuities are recommended for:

  • Those who know about the behavior of stocks, bonds, and markets.
  • Those who seek a greater return on their investment and are willing to take on greater risk.

By investing in a variable annuity, an investor can accumulate wealth and still get some protection regarding the principal investigated. The income generated is still tax-deferred, and the investor still has a minimum monthly guarantee. In some cases, you can also remove funds and assign a death benefit to your relatives.

Investors sometimes buy Variable Annuities with the promise of market-like growth with less “risk.”  Risk-Taking exists in any investment and our Financial Advisors will explain all of the pros and cons of this investment. Today, there are many different choices and variations in the types of Variable Annuity contracts available and this makes this type of investment much better in the 21 century. Our Financial Advisors will explain all of the details to you.

Our financial advisors have helped many clients who have come to us with questions about these variable annuity products.  We believe it’s important for investors to have a clear understanding of just what they entail.

Features of a Variable Annuity

Like all annuities, these promise to pay you a stream of income beginning at a specific time in exchange for the premiums received.

The variable rate of return during the accumulation period separates variable annuities from other annuities. The annuity owner makes the decision on what securities or funds to invest his or her money.  He or she then directs the funds into various security “sub-accounts”  and those investments will determine the rate of return of the investment.

The gains or losses from these investments determine the return. Theoretically, this arrangement allows the deposits to grow during the accumulation period, leading to a potentially larger income stream in the pay-out phase. The investigator should understand that losses are a possibility and that along with bull markets there are also downturns in the market. In the long run, history reveals that profits should far outweigh any losses.

Risk Involved

So, to recap, remember all of the following when considering a variable annuity contract:
  • Guaranteed principal: Unlike some other types of annuities, protecting the principal in variable annuities can occur upon purchasing a rider.
  • Inflation: Annuity payments do not always keep pace with inflation, depending on the terms of the annuity purchased.
  • Inflexibility: Variable annuities are not liquid. If you need money prior to maturity for an emergency or an investment opportunity, just like a CD, you cannot withdraw funds without incurring a penalty.
  • Insurer insolvency: Insurance-company default rates are extremely low, but investigators should invest in well-known and well-established Insurance Companies.
  • Limited ability to transfer wealth: Ownership of the principal usually transfers to the insurer upon maturity. Typically, beneficiaries receive nothing after the annuitant passes unless a death-benefit rider has been purchased.

The Fees for Variable Annuities

There are fees to purchase any financial instrument. Whether you purchase stocks, bonds, or CDs. Sometimes the fees are hidden and sometimes they are identified upfront. Our Financial Advisors will explain all of the fees for a Variable Annuity These charges can be many and varied, but they generally include 1.4% (according to the SEC) simply to cover the annuity’s cost.

How Do Variable Annuities Compare With Other Investments

Unless variable annuities are purchased with protection riders, they offer essentially the same risk as a direct investment.

Our Annuity Counselors are available to offer complimentary evaluation services for qualified investors. We’ll analyze the annuities you own or are considering, to explain exactly what these contracts truly provide. We also help qualified investors identify opportunities that may be more suitable for a portfolio than an annuity. Contact us today to schedule an appointment.

Contact Us

Our Annuity Counselors are available to offer complimentary evaluation services for qualified investors. We’ll analyze the annuities you own or are considering, to explain exactly what these contracts truly provide. We also help qualified investors identify opportunities that may be more suitable for a portfolio than an annuity.

Contact us today to schedule an appointment.