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You are here: Home / Annuity Types / Variable Annuities / Variable Annuity Performance

Variable Annuity Performance

Today's Top Ten Fixed Annuity Rates (MYGA)

ALL rates are continually subject to change and accuracy is never guaranteed since rates and features change frequently. Rates are provided for conceptual and educational purposes only. RATES SHOWN ARE NOT A SOLICITATION.
 

Performance of Variable Deferred Annuities

Since variable annuity# performance is tied to the securities market, we have to look beyond the last ten years – which have not been so good. Instead, you should consider that over the last 50 or so years the total returns possible by investing in an index fund that mirrors, say the S&P 500 or the Dow Jones Industrial average, would have averaged in the vicinity of 9% annually!
 

**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.

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The possibilities are open using investment diversification with potential growth, while harnessing the power of tax deferral made possible with variable annuities#. Variable annuities operate similar to 401K plans and other qualified retirement plans that allow risk type investments for allocations within the plan. Unlike employer-sponsored plans, there are no limits on how much you can sock away using a variable annuity#. One of the recent comparisons and complaints leveled at both variable annuities# and many employer-sponsored plans are the high fees that tend to cut the overall return and growth of the retirement investments. From 1999 through 2009 variable annuities# have generally not fared well based on a down stock market and not so well against market index funds, since variable annuity# fees are typically up a couple of percents higher.

An approximation of fees that are customary on variable annuities# are as follows: Administrative: .25%; Mortality: .75%; Income rider: .75%; Enhanced Death Benefit: .75%; Underlying Investment Expense: 1.5%. As you can see, minimum fees on a stripped out variable are around 2% and a fully featured variable annuity# may run as high as 5%. The problem with fees is obvious. If your investments are down 20% and you add fees, you are down about 25%. So fees would actually comprise around 20% of your loss, which does a real number on your principal. In down markets the equation mostly does not work so well for variable annuities#.
Deferred Variable Annuity vs Deferred Fixed Annuity
So, what is the distinction between variable deferred and fixed deferred? It is real simple: Fixed is when the insurance institution assumes the risk for your principal and accumulation and variable is when you assume the risk for the underlying investments, principal and accumulation.

Deferred Variable Annuity Performance & Facts

  • Deferred variable annuities# originated in the U.S. approximately 60 years ago
  • They can be purchased in periodic, systematic or lump sum payments
  • Deferral in variable annuities# allows the value of the annuity to increase
  • Variable annuities have the greatest potential for gain or loss
  • After a deferral period, a variable annuity# may produce more income
  • Deferred variable annuities# have the added advantage of tax deferral
  • They can be annuitized providing a lifetime of income; however, it may fluctuate
  • They are the opposite of immediate annuities, since immediate annuities begin income soon after they are purchased in a lump sum
  • Variable deferred annuities are typically invested in the securities market and the purchaser assumes the market risk
  • Deferred variable annuities# are creditor-protected in most states.
  • Deferred variable annuities# are first **guaranteed by the claims paying ability of the insurer. The underlying invested assets are owned by the client and are not at risk if the insurer defaults
  • Check out our deferred variable annuity# calculator

Deferred Variable Annuity Performance Summary

All deferred variable annuities# enjoy tax deferral with no income tax requirement until withdrawal. This may be an advantage over many investments like CDs, mutual fund^s and securities-oriented investments when considering a long term retirement plan. A long term variable annuity# investment may be able to outperform CDs, bonds and treasuries. Reinvesting money that would otherwise be paid out in tax over an extended period of years is always an advantage. In addition, deferred variable annuities# have several benefits that may be beneficial for retirement planning.

Question: How are licensed agents or advisors compensated on variable annuities#?

Answer: By commission, which is normally paid up front and in a trail as long as you own the variable annuity#. This normally works out to around 1% per year so over 20 years the commission would likely be 20% of your account value on an annually increasing amount (hopefully increasing or ouch). Mutual funds and money management pay similarly. Fixed annuities generally pay a one-time commission or an initial set up administrative fee.

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  ** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
Annuities are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.


  *Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping Annuity Guys website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this educational Annuity Guys Website. He still maintains his insurance license in good standing and assists his current clients.
Annuity Guys' vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)



  # Investors should consider the investment objectives, risks, charges and expenses of a variable annuity and its underlying investment options. The current prospectus and underlying prospectuses, which are contained in the same document, provide this and other important information. Please contact an Investment Professional or the issuing Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.


  ^ Investors should consider investment objectives, risk, charges, and expenses carefully before investing. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.


  ^ Eric Judy offers advisory services through Client One Securities, LLC an Investment Advisor. Annuity Guys Ltd. and Client One Securities, LLC are not affiliated.


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