7 Essential Characteristics Of Variable Annuities That You Should Understand

An annuity is an investment made by an annuitant

. The net income generated would be distributed to the annuity leads either once in a year, or twice in a year or even quarterly. Annuities are insurance products that are typically integrated into retirement programs. When the annuitant stops working, it helps the annuitant or his or her recipient receive stable income. Annuity Leads are useful in matching potential annuity investors to the right annuity type, from several types of annuities. If you are interested in investing in an annuity, you might want to consider the variable type of annuity. First you must understand certain things about it.

This is the sort of contract that is purchased by an annuitant

Like other types of annuity, a variable annuity is an agreement by two parties: the insurance company, who is the insurer, and the annuitant, who is the investor. A lump sum or installment payments are the two ways customers can pay for variable annuity contracts.

Here, you will find many options for investing

Variable annuities offer a number of options for the investor. These may consist of the following; bonds, stocks, money market vehicles or an assortment of these three.

It uses mutual funds

Typically, mutual funds are used in variable annuities for investing in bonds, stocks and money markets. The procedure of investing funds follows typical mutual funds process with no guaranteed value for the investment. The investment values will correspond to the performance of the annuitant's chosen investments, similar to traditional mutual funds. However, switching one fund to another shall not incur any costs or sales charges for the investor, unlike ordinary mutual funds.

It provides stable income

Like other annuity product, variable annuities also offer the annuitant the opportunity to have a stable source of income over a particular period of time. The annuitant may receive the money from the insurer right away or at a later time depending upon the details of the contract. It is up to the annuitant whether she/he will receive the money all at once or in regular payments.

It requires the annuitant to pay certain fees

There are some fees that have to be paid while purchasing the variable annuities, as well as charges for the mutual fund investments. Typically, these fees include surrender charges, expense risk charges, administrative charges, underlying fund costs and fees for other special features.

There are two stages

There are two phases through which the variable annuities go. In the first phase which is the accumulation phase, the purchase payments are made and subsequently allocated to the annuitant's choice of investments. The second period is called the payout period. Here purchase payments will be returned to investors along with money that has been accrued due to investment choices.

This happens to be tax-deferred

One of the positive attributes of a variable annuity is its tax-deferred status. In other words, the investor's income and gains from the different investments will not be taxed until the money is withdrawn or taken out of the variable annuity.

In the end, just like any other investment, the outcome of variable annuities will depend on the annuitant's decisions and objectives.

by: Jacob Schiffer

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