Variable Annuities

   Variable Annuities are a Registered Product. As such, they are regulated by both the SEC and NASD,  ( Securities & Exchange Comm. & the National Association of Securities Dealers). Due to restrictions the description of Variable Annuities will be generic.

Both Fixed and Variable Annuities (VA) are insurance backed products. They both receive the protection of State Statue 222.14 against attachment or liens. They both are insured by the state up to $300,000. Banks are still at only $100,000 through FDIC in the event of bank failure. And they have failed recently. 

Variables may be best described as a Mutual Fund wrapped inside an insurance contract. A VA will have sub Accounts in which you may place or spread your purchase amount. The Sub Accounts may be from a variety of investment companies. They will offer a broad range of options and risk level, including a Fixed Account that will offer a fixed amount of interest regardless of the performance of the rest of the account. 

Except for the fixed account, the Accumulated Value will vary from day to day. The value can go up or go down similar to a Mutual fund. 

Q. Can you lose money with a Variable Annuity?  Yes & No.

First and foremost, the VA is an insurance product. The VAs have many details that you should fully understand. They have options that will benefit you with certain restrictions. Before you purchase a VA or any other item with your retirement funds, fully understand what you are purchasing.

The daily value will change. If you choose to remove assets out of the annuity, before the end of the contract, it will be at the current value.

You may obtain options to ensure future values offered by the respective company. Many Brokers sell against a VA by claiming that they have high fee’s. One of those fee’s is called an M & E fee (Mortality & Expense ) which covers the fact that some of the contract holders will pass away prior to the end of the contract period. They will pay to the beneficiary the larger of the Accumulated Value or the Purchase Price.

Two examples. #1. You purchase at $100,000 and pass away when the value is $150,000, your beneficiary will receive $150,000.  #2. You purchase at $100,000 and the value goes down to $50,000. Due to the M & E fee, your beneficiary will receive the purchase amount of $100,000. BY COMPARISON: Your other investments go down 50%, your heirs will receive only the current value, having lost 50% to market conditions.

Remember State Statue 222.14 covering ALL annuities? If you have a car accident and are sued in court, you can lose your NON - IRA Mutual Fund or stock portfolio. All annuities are protected from attachment.

Variable Annuities are good if you understand that there is a risk factor. If you do not want any risk, stay with a true fixed annuity. Although a VA does have a fixed account, they generally are at a lower interest rate than a standard, basic Fixed Annuity. The true Fixed annuity will never lose any value and will only gain.

E-mail us @