What is a variable annuity?

When you need the most growth potential

With a variable annuity, the contract value fluctuates based on the ups and downs the market may experience. This is in contrast to a fixed annuity, which provides a guaranteed interest rate, regardless of what may happen in the market.

When you purchase a variable annuity, you can choose from a selection of investments called subaccounts, which include stocks, bonds and money markets. Your financial professional can tell you more about how subaccounts work. You can also tailor your contract to meet more of your needs by optional riders at an additional cost.

What are the benefits?

Tax deferral

Its tax-deferred status allows you to benefit from compounded growth.

Investment choices

Unlike their fixed counterparts, variable annuities give you a chance for long-term capital growth through investment in subaccounts.

Flexibility

Choose from different levels of risks and potential growth. You can also, on some accounts, exchange between subaccounts without fees or tax consequences.

Lifetime income

Get income you can't outlive either through annuitization (at no additional cost) or through the use of an optional rider (available for an additional cost) that guarantees income for a single person or to also cover your spouse when a joint option is selected.

Beneficiary protection

You can pass assets to beneficiaries and avoid costly probate. Optional riders can also enhance what your beneficiaries may receive.

Spousal opportunities

Most variable annuities offer a spousal protection feature to the surviving spouse upon the death of a spouse.

Only certain carriers can offer this same benefit on IRA contracts.

What should you consider before purchasing?

Risk of decline

Like mutual funds, if the underlying investments chosen for the annuity decline, the annuity's contract value also declines.

Surrender schedules

It's best used for a long-term contract, as taking out money early can trigger charges.

Higher fees

Fees may be higher when compared with investments like mutual funds. However, higher fees support the guarantees offered by the product.