In contrast to a fixed annuity, the key features of a variable annuity can fluctuate (they are “variable”) during the accumulation period and during the payout phase. Also in contrast to a fixed annuity, the variable annuity contract holder assumes much of the investment risk. With a variable annuity, the insurance company provides the contract holder with the ability to determine how his or her premiums are invested. One investment option is a variable account which typically consists of equity, bond or money market mutual funds. The other option is the general account of a variable annuity which provides a guaranteed return. The contract holder decides how much risk or variability they want to tolerate by allocating premium payments among the general and variable accounts. The amount of money accumulated and the amount of income during the payout phase are determined by the returns of these accounts. With a variable annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable or non guaranteed rate; 3) payments are variable and can begin immediately or at some future date.
Expenses should be a top priority for any financial services consumer. Many people have been conditioned to be aware of expenses when it comes to investment products. Indexed-bases investment management companies such as
The tough thing about classifying annuities is that the three common features described in the previous chapter can be mixed and matched to create a bewildering array of options.
Submitted by tom on
The Hartford Financial Services Group has apparently sent a letter directly to annuity owners informing them of the "opportunity" to trade their older variable annuity contracts for new and repriced variable annuities.
Some industry observers consider the letter and offer self-serving at best. Apparently many of the older contracts contain the type of impossibly rich benefits that created so much of the recent trouble at the Hartford.
Submitted by tom on
It is reported that Federal Reserve Chairman Ben Bernanke owns two annuities.
One is a variable annuity and the other is a fixed annuity. Each annuity is worth between $250,000 and $500,000.
