A variable annuity has Which of the following characteristics

Variable Annuity Benefits

The features of variable deferred annuities are many. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. Inflation-hedging, using both tax deferral combined with market growth potential, is made possible by variable annuities#. Variable annuities operate in similar ways 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 put away when using a variable annuity#. One of the recent comparisons and disappointments leveled at both variable annuities# and many employer-sponsored plans are the higher 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 a couple of percent or more higher than some of the alternatives.
 

**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.

In 1952, the first variable deferred annuity was introduced by TIAA Cref to help teachers save while having the potential to grow their retirement funds with a hedge against inflation. This new type of annuity being a mixture of insurance and investment had to be regulated by the state insurance and investment regulatory authorities, which slowed its early development. Regulatory agencies finally embraced this investment-oriented annuity in the seventies possibly due to the pressure felt by higher than normal inflation. Since then the variable deferred annuity has become a staple in the financial planning world. It works especially well for younger professionals seeking moderate to aggressive growth with tax deferral.

Deferred Variable Annuity vs. Deferred Fixed Annuity

All annuities other than immediate annuities have a characteristic known as deferral. The purpose of deferral is twofold: First, it refers to money being left in a savings and growth stage over a period of time, also referred to as the accumulation stage. Second, deferral refers to the tax characteristics of deferral, allowing money to grow tax-free until it is withdrawn for income. Thus, an immediate annuity is neither deferred for growth nor tax deferral, and therefore not considered a deferred annuity.

So, what is the distinction between variable deferred and fixed deferred? It is very 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.

Key Facts of a Deferred Variable Annuity:

• 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 over time
• After a deferral period, variable annuities# 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

Features of a Deferred Variable Annuity 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 can I find exact details about the variable annuity# I am considering?

Answer: Ask for the prospectus. Since variable annuities# offer securities, they are disclosed via a prospectus. Be prepared. though. Most variable annuity# prospectus disclosures are between 125- and 250-pages long!