Variable Annuities

Variable annuities offer investors numerous fund choices.

Variable annuities have many of the same features as fixed annuities — including tax-deferred earnings and a choice of payouts, plus the opportunity to make unlimited contributions if the annuity is nonqualified. In addition, they offer the potential for greater returns and the opportunity to make your own decisions about how to allocate your assets among investment funds offered through your contract.

A potential downside of variable annuities, though, is that the return is not guaranteed. You may have only small gains — or no gains — in some periods and you could lose principal.

Creating a portfolio

With variable annuities, lots of things can vary, or change: the rate of return you earn, the amount of income you receive if you annuitize, or convert your account value to a stream of income, and how your money is invested.

When you invest in a variable annuity, your money is allocated (referred to as premiums) among a number of investment funds, (also called subaccounts or annuity funds.)

The accounts may be designed specifically for the annuity company or may be versions of existing mutual funds that are customized for exclusive annuity use. Although the names of the investment funds may be the same or similar to those of retail mutual funds, they are not the same funds.

Managing the portfolio

Our job, as investment manager, is to choose among the funds that the issuing company offers, much as you would with a 401(k) or 403(b) retirement plan.

Typically, there will be more than a hundred fund choices, including stock portfolios, sector funds, money market account, government bond portfolio(s), a corporate bond portfolio(s), and a guaranteed account, which is similar to a fixed annuity investment.

For more information, please contact us.