What is a variable annuity?
Variable annuities are insurance and investment products that are joined together to create a unique product for retirement. Annuities offer tax deferred savings plans that are insurance like – using an insurance policy to provide the deferral of taxes. Together, insurance and investment provide you with: • Tax deferrals on earnings in the annuity. • The ability to name your beneficiaries who will receive the balance of the variable annuity upon your death. • Annuitization, which means that you will receive payments for the rest of your life based on your life expectancy. • Guarantees that are provided by insurance companies. Variable annuities invest in bonds or stocks and have no definite rate of return. They can offer a much higher rate of return when they are compared to fixed annuities. Variable annuities are investments for retirement. The main reason people purchase variable annuities is for the tax deferred earning status as well as the ability to prolong payments for the rest
Variable annuities are contracts with insurance companies under which you make a lump-sum payment or series of payments into a tax deferred account. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. You can choose to invest your purchase payments in a range of investment options, which are typically mutual funds. The value of your account in a variable annuity will vary, depending on the performance of the investment options you have chosen (source: SEC).
