Variable Annuities have separate sub accounts that have access to market equities and bonds. Market equities and bonds have risk. That risk could expose the contributions or deposits to loss in the cash value account. A personal profile to establish risk tolerance is necessary of product suitability.
Any gains in a non-qualified variable annuity accumulate tax deferred. Distributions of gain are subject to ordinary income tax. There are also variable annuity expenses loads associated the policy as well as extra expenses for various riders.
Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
A variable annuity is a mortality insurance product, under the department of insurance as well as a security product under the jurisdiction of FINRA. Variable annuities have two main accounts: an interest rate accounts and separate sub accounts using equity and bond investments. The accounts accumulate tax deferred and are taxable upon distributions as ordinary income.
Before defining Variable Annuities, it is important to have an understanding about annuities in general.
Immediate guaranteed annuity - in exchange for a lump sum the insurance company will pay a guaranteed amount for the rest of your life, (with or without a minimum payout guaranteed) or for a specified term or duration. Easy way to understand it is like a mortgage in reverse- you give lump sum and get income in return.
Immediate variable annuity - in exchange for a lump sum you receive an income as above, all or part of the income amount depends on the performance of a pool of funds or an index chosen by you.
Deferred annuity - you deposit fund with an insurance company and the funds are invested and you have guaranteed annuity amount or an option to receive at maturity (depending on what you had chosen).
Variable deferred annuity- In Canada, these are typically called segregated funds and are similar to mutual funds, but since they are issued by insurance companies, they have guarantees at maturity and death.The amount of the investment will vary depending on the performance of the funds chosen and can be converted into a immediate annuity at maturity.
This is a very simple overview of a potentially complex subject and you should not take any action before discussing with a licensed professional.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community. .
The amount of money deposited with a company can be handled in a variety of ways. The basic annuity provides guarantees. The annuitant doesn’t get involved with the annuity once it commences. At the other end of the spectrum is a variable annuity. In a variable annuity the annuitant can maintain control over the investments that underlie the annuity. This might result in frequent shifts in the value of the annuity and in the monthly payments being made.
That is a great question! There are basically three types of annuities. Two are simple, and unregulated, as their performances have stated guarantees and payment amounts. They are fixed annuities, and indexed annuities. In the first, the rate of return is a clearly stated percentage. In the second, the rates of return can vary, and are tied to the performance of a market, typically the S&P 500. Even when the market fails to perform, this type of annuity has provisions to protect your investment. The other type of annuity is the variable one. It has no such guarantees, and is considered to be a security, so it is highly regulated, and anyone selling it to you needs to be licensed by the SEC. This annuity can make or lose money for you; it's payments can vary, based upon its performance of the underlying investments. This is an investment that should be carefully considered before purchasing, even more so than usual. I hope that helps, thanks for asking!
A variable annuity is a contract issued by a life insurance company. In order to sell such a contract the agent must also hold a variable license and must have passed exams from FINRA. The reason for all this is that the funding mechanism for a variable annuity may contain investments that are linked to the stock market. The owner of the annuity may direct the investments and may change them as required. The funding is not guaranteed. Sometimes the annuity payments continue to be subject to the actions of the market making those particular payments variable as well.
.JPG){kind=avatar}
Any gains in a non-qualified variable annuity accumulate tax deferred. Distributions of gain are subject to ordinary income tax. There are also variable annuity expenses loads associated the policy as well as extra expenses for various riders.
Immediate guaranteed annuity - in exchange for a lump sum the insurance company will pay a guaranteed amount for the rest of your life, (with or without a minimum payout guaranteed) or for a specified term or duration. Easy way to understand it is like a mortgage in reverse- you give lump sum and get income in return.
Immediate variable annuity - in exchange for a lump sum you receive an income as above, all or part of the income amount depends on the performance of a pool of funds or an index chosen by you.
Deferred annuity - you deposit fund with an insurance company and the funds are invested and you have guaranteed annuity amount or an option to receive at maturity (depending on what you had chosen).
Variable deferred annuity- In Canada, these are typically called segregated funds and are similar to mutual funds, but since they are issued by insurance companies, they have guarantees at maturity and death.The amount of the investment will vary depending on the performance of the funds chosen and can be converted into a immediate annuity at maturity.
This is a very simple overview of a potentially complex subject and you should not take any action before discussing with a licensed professional.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community. .