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Variable Annuities

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Variable Annuities

An annuity is a type of insurance contract where the annuity holder pays a single lump sum or monthly premiums in exchange for a stream of payments over a fixed amount of time, or until the end of the annuity holder’s life. There are multiple different types of annuities, each that offers different levels of risk and return. One popular type of annuity is a variable annuity. Consider the following about variable annuities, and reach out to our experienced professionals at Top Investment Solutions if you have questions or want to learn more. 

What Is a Variable Annuity?

A variable annuity is different from a fixed annuity in the returns it offers; a fixed annuity offers fixed returns, whereas the returns of a variable annuity depend on the performance of an underlying portfolio of subaccounts. The value of a variable annuity is based on two factors:

  1. The amount of money that the annuity holder initially invests into the annuity, or the principal; and 
  2. The returns that are delivered on that principal over the course of time, which can vary depending on the market. 

Deferred vs. Immediate Annuities

Within the category of variable annuities, there are both deferred and immediate annuities. It’s important to talk to a financial professional about these differences and the type of annuity that may be most appropriate for you before investing in an annuity. The basic differences between deferred vs. immediate annuities are explained below:

  • Deferred annuities. A deferred annuity is a more popular type of annuity, but it requires some long-term organization. In a deferred annuity structure, payments are made to the annuity holder at some point in the future following the payment of premiums. These are meant to provide a regular stream of income. 
  • Immediate annuities. With an immediate annuity, on the other hand, payments to the annuity holder begin immediately. 

Advantages and Disadvantages of Variable Annuities

There are both benefits and drawbacks of variable annuities compared to other annuity types. For example, some of the advantages of a variable annuity include that any growth in the annuity is tax-deferred, the income stream of a variable annuity can be tailored based on the annuity holder’s specific needs/financial goals, the funds held in the annuity cannot be acquired by debt collectors, and a guaranteed death benefit for beneficiaries if the annuity holder dies before payouts begin. On the other hand, variable annuities are higher risk than fixed annuities and also typically feature high fee structures. 

Learn More from Top Investment Solutions Today

For those who are looking to invest for the future and secure a steady stream of income for themselves after retirement age, investing in a variable annuity can be a wise part of a strategic financial plan. However, annuities are very complicated financial products, and it’s always wise to speak with a professional who can understand risks, returns, fee structures, and other considerations first. 

At Top Investment Solutions, our annuity experts are here to help. For any questions about variable annuities or other annuity products, contact us directly by phone or online.

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