What is a variable annuity? You can rest assured that your variable annuity will provide you with a steady stream of income beginning when you retire and continuing for the rest of your life, so long as you annuitize (begin receiving payments) before the contract’s value decreases. The investment performance of your variable annuity may influence the size of the dividends you receive. Greater profits will almost certainly translate into higher payments. Lower gains – or losses – will almost certainly result in lower rewards. What Benefits Does a Variable Annuity Provide? A variable annuity provides several significant benefits, including retirement income, potential tax-deferred investment growth based on market performance, and the ability to pass money on to your heirs, depending on the contract.
- Retirement income: A variable annuity, like other annuities, can offer ongoing income distributions during retirement.
- Potential for investment development: Variable annuities allow you to select from several investing possibilities within the scope of your contract. Some people prefer this choice to a fixed annuity, which grows in value at a fixed interest rate.
- Tax-deferred growth: Variable annuities, like 401(k)s and traditional IRAs, have tax-deferred earnings. That is, they are not taxed while you are contributing to the annuity, which may lead to faster growth. When you withdraw income payments, the money is liable to income tax.
- The ability to leave money to your heirs: Most variable annuities also provide a standard death benefit. If you pass away before receiving annuity payments, this sum is given to your beneficiaries. Optional death benefits may necessitate the purchase of an additional policy rider.
- Greater flexibility: Diversification is vital in every portfolio. Variable annuities provide a broader selection of investment options, allowing you to select the best suited to your clients’ needs. You can also diversify your investments to reduce risks if the market falls.
- No contribution limits: Unlike other investment funds, there are no contribution limits for variable annuities. They may be a good choice for clients who wish to reduce their taxable income.
- The fund is not subject to probate: Variable annuities are free from probate, so beneficiaries do not have to wait for lengthy legal proceedings to get the funds.
Immediate vs. Deferred Variable Annuities The duration of income provided by immediate and deferred variable annuities differs. Variable annuities with immediate payouts An immediate variable annuity begins paying off soon after you deposit money into it. You pay a single premium to finance it. It will begin giving you income soon (within a year – and possibly within 30 days). Thus, there is little opportunity for savings to grow. Because your periodic income payment amounts are linked to the success of the annuity’s investment subaccounts, they can alter over time. Variable annuities with deferred payments A deferred variable annuity involves a waiting period between the time you begin investing and the time you begin receiving income. Deferred variable annuities can be funded with either a lump sum premium or a series of installment payments. Your income withdrawals begin (or at some other future date, as stated in your contract) when you retire. Earnings might accumulate between when you begin making payments and when you begin withdrawing. Increasing the value of your contract can raise the income payments it offers. Many people include delayed variable annuities in their total retirement strategy. Fixed annuities vs. Variable annuities Variable annuities differ from fixed annuities in how their value grows (or decreases). The value of a variable annuity rises or falls based on the performance of its underlying investments in the market. Some individuals prefer the riskier variable annuity because it may offer a higher return. However, if the market falls, a variable annuity may yield less than a fixed annuity or lose its entire value. The guaranteed interest rate of a fixed annuity may only provide a modest return. However, it safeguards against loss and provides the advantage of knowing exactly how much the annuity’s value will grow ahead of time. How may a Variable Annuity be Used? Assume you have 15 years before retirement. You’ve saved some money and invested it in a 401(k) or an IRA. Maybe you have one of each. However, you are unsure whether they will give you enough money to support you during your retirement. Let’s say you’ve saved up a sizable sum or have room in your monthly budget for a new premium. In that case, you could invest it in a variable annuity. This would guarantee a higher income beginning on a specific date (such as the day you turn 65) and continuing for the rest of your life. Investing more aggressively may increase your chance of loss but also result in bigger profits. Investing more conservatively may limit your potential loss but result in fewer earnings. Often, such decisions should be based on how your other retirement savings vehicles are invested. You can use this as a possible asset in building a diversified portfolio.
Contact Information:
Email: [email protected]
Phone: 6122163911
Bio:
Mickey Elfenbein specializes in working with Federal Employees relative to their retirement benefit plans, FEGLI, TSP, Social Security and Medicare, issues and solutions. Mr. Elfenbein’s mission is to help federal employees to understand their benefits, and to maximize their financial retirements while minimizing risk. Many of the federal benefit programs in place are complicated to understand and go through numerous revisions. It is Mr. Elfenbein’s job to be an expert on the various programs and to stay on top of changes.Mickey enjoys in providing an individualized and complimentary retirement analysis for federal employees.He has over 30 years of senior level experience in a variety of public and private enterprises, understands the needs of federal employees, and has expertise built on many years of high-level experience.
