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Variable Insurance Products
Variable insurance products, which include variable annuities and variable life insurance, differ from traditional "fixed dollar" insurance contracts in the way in which benefits are funded. Premium payments are held in a "separate account" that provides the contract owner with a variety of investment options. The benefits ultimately realized by the contract owner depend on the investment performance of the separate account. Sales of variable annuities and life insurance have grown significantly in the past few years.
Annuities are a common form of Variable Insurance Products. Annuities can be powerful retirement vehicles because they can accumulate value on a tax-deferred basis or can be a source of lifetime income for retirement, or the realization of other financial goals.
There are different types of annuities. Fixed Annuities guarantee a fixed rate of return. Variable Annuities produce a varied rate of return based on the performance of the underlying investment portfolios.
A variable annuity combines the standard features of most annuities with investment choices. As with most annuities, it offers tax deferred growth on your earnings and a death benefit for your beneficiaries. Plus when you purchase a variable annuity, you can choose how you want your money invested from a wide range of investment options called sub-accounts. NetInvestmentAdvisor.com helps you make a wise investment choice when deciding on which sub-accounts to invest in. These underlying portfolios are invested in common stocks, bonds, money markets or a combination of these. It’s important to make a wise investment choice because the value of your annuity will increase or decrease depending on your contributions and the performance of your investment choices.
Variable annuities provides the benefits of both market participation and tax-deferred accumulation.
What Are Variable Annuities?
Although variable annuities offer investment features similar in many respects to mutual funds, a typical
variable annuity offers three basic features not commonly found in mutual funds:
- Tax-deferred treatment of earnings;
- A death benefit; and
- Annuity payout options that can provide guaranteed income for life.
Generally, variable annuities have two phases:
- The "accumulation" phase when investor contributions - premiums - are allocated among investment portfolios – sub-accounts - and earnings accumulate
- The "distribution" phase when you withdraw money, typically as a lump sum or through various annuity payment options.
If the payments are delayed to the future, you have a deferred annuity. If the payments start immediately, you have an immediate annuity.
As its name implies, a variable annuity's rate of return is not stable, but varies with the stock, bond, and money market sub-accounts that you choose as investment options. There is no guarantee that you will earn any return on your investment and there is a risk that you will lose money. Because of this risk, variable annuities are securities registered with the Securities and Exchange Commission (SEC). The SEC and NASD also regulate sales of variable insurance products.
401k •
403b •
Taxable Savings •
Individual Retirement Account (IRA)
Variable Life Insurance / Variable Annuities •
Thrift Savings Plan
