What is a Variable Annuity?

What is a variable
annuity?
The Annuity Expert

A variable annuity is a tax-deferred annuity that
participates in investments including the stock market and
bond market.
The return earned in a variable annuity isn’t guaranteed.
The value of the subaccounts chosen could go up or down.
The Annuity Expert

If the annuity goes up, the retirement plan could make
money.
But, if the value of these subaccounts goes down, the
contract could lose money.
Also, income payments to the owner could be less than
expected.
The Annuity Expert

The Accumulation Phase
The Annuity Expert

Variable annuities earn investment returns based on the
performance of the investment portfolios in various
markets, known as “subaccounts,”.
The contract will offer investment choices likely to include
subaccounts with different types and levels of risk.
The Annuity Expert

The return earned in a variable annuity isn’t guaranteed.
The value of the subaccounts you choose could go up or
down.
The Annuity Expert

However, you may allocate some of your investment choices into
a fixed interest rate option that is guaranteed not to change for a
specific amount of time, typically 1 year.
If the subaccount values go up, you could make money.
If the value of these subaccounts goes down, you could lose money.
Your annuity value will change everyday based on the subaccounts
performance.
The Annuity Expert

Remember this an investment product not an
insurance product like all other annuity contracts.
The Annuity Expert

The Income Phase
The Annuity Expert

In every variable contract, there is an
optional payout period which is annuitizing your
current annuity contract value.
Most variable annuity owners don’t annuitize the
contract.
The Annuity Expert

Instead, they purchase a living benefit or income
rider to generate a lifetime retirement income.
The Annuity Expert

The living benefit guarantees a particular
minimum level of annuity payments, even if you do
not have enough money in your account (perhaps
because of investment losses) to support that level
of payments.
The Annuity Expert

Variable annuities charge various annuity fees and
charges for various riders, investment
management, and other bells and whistles.
One should expect to pay roughly 3% to 4% of
your current contract value each year.
The Annuity Expert

For example, if your variable annuity is worth
$100,000, you would expect to pay between
$3,000 to $4,000 in fees this year alone.
The Annuity Expert

Death Benefit
The Annuity Expert

Variable annuities offer a death benefit.
If you die during the deferral period, all or some of the annuity’s
value is paid directly to your beneficiaries either in a lump sum
payment or a series of payments over time.
The amount is usually the greater of the annuity account value or
the minimum guaranteed surrender value.
The Annuity Expert

If you die during the income phase, after you annuitize the contract,
your beneficiaries may receive a lump sum payments, series of
payments, or nothing at all depending on the annuitization payout
structure.
The Annuity Expert

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What is a Variable Annuity?

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