Variable Annuity

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A Variable Annuity (VA) is an important but complex financial planning tool used in retirement planning.

 

A VA is sold by prospectus and only by those financial advisors who are securities licensed. A VA pays a variable rate of return because it is directly invested in the stock market through mutual funds, ETFs, bonds, index funds, and other investment instruments. As the markets fluctuate daily, so does the account value of the VA.

 

A Variable Annuity is a contract between an individual or married couple with an insurance company stating that, in exchange for a single premium payment or a series of payments, the insurance company promises to pay the annuity owner a series of payments in the future. Tax-deferred growth means no annual taxes are due. There are no contribution limits, and no Required Minimum Distributions (RMDs) if purchased with after-tax money.

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Choose Your Withdrawal Options 

  • Periodic Payments for Life
    Annuity payments are made until the annuity holder’s death

  • Joint Life with Last Survivor
    Annuity payments continue until the death of the surviving spouse

  • Period Certain
    Annuity payments will be made for a specific period of time

A VA does not guarantee a Death Benefit, though a few VA options offer a minimum Death Benefit or Return of Premiums, less withdrawals, for an additional fee.

 

 

Taxes and Fees

  • A 10 percent IRS Penalty for early withdrawals prior to age 59½.

  • Surrender Charges (fees) for withdrawing money before a predetermined lockdown (a set number of years) of the Principal. Generally, 10 percent of the principal can be withdrawn every year (starting in the second year) without any surrender charges

  • A few VA variations come with no surrender charges but with higher annual fees

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