When the media speaks about annuities they are most often referring to one type of annuity, the Variable Annuity. A variable annuity is an annuity issued by an insurance company and is sold by registered representatives of a broker/dealer. Broker/dealers are regulated and over-seen by FINRA.
When you purchase a Variable Annuity you have a couple options given to you. You are first given an option to allocate some of your funds into the “fixed account”. This is essentially a fixed annuity itself and generally contains a guaranteed interest rate for the fist year and a interest rate which the insurance company will set in each year to follow.
Your next option is choosing a “sub account”. Variable Annuities offer accounts which are referred to as “sub accounts”. These accounts are actually mutual funds packaged to be sold as part of a variable annuity.
The money placed in a “sub account” of a Variable Annuity is subject to the volatility of the market and has no guaranteed floor value. Therefore the funds you place in a “sub account” of a Variable Annuity are NOT GUARANTEED!
All Variable Annuities are subject to a certain charges. First the “Mortality Charge” which can be as low as 0.20 to greater than 1.50% of your total annuity value each year. You will probably also see a common “fund management fee” which is assessed each year based on the value of the “sub account”. Again the ranges of fees may be as little a 0.50% to as much as 4.00% for some International “sub accounts”.
If you are looking for information regarding annuities that don’t have as many fees, please read the informaton we provide regarding Fixed Annuities or the more popular Equity Indexed Annuties. You may also want to read our information on Lifetime Income Riders. Any questions Please fill out my form.
