Variable Annuity Connecticut
Here is some information about Variable Annuity Connecticut:
A variable annuity (VA’s) is an insurance contract that relies on investment accounts (Mutual Funds) to determine performance of the money in the annuity. Depending on the product, there can be a number of different mutual funds within the annuity for the investor to choose from. There are usually more than enough accounts to choose from in order to have a diversified investment allocation. The VA’s have a number of riders that can also be added. I have provided a quick summary on VA products and some of the riders that may be added to them.
most VA’s have a surrender period. If you take out more than 10% of the value in any given year during the surrender period, there will be a penalty. Most VA surrender periods are 10 years and operate on a declining surrender charge scale (10,9,8,7,6 etc..).
There usually is not a surrender charge for taking the funds out early if there is a qualifying event such as the need for long term care or in the event of death. Because VA’s use mutual fund accounts, the products can lose money in a bad market.
If someone chooses funds that are mostly based of equities:
they will lose value if those funds lose value. In the other hand, VA’s can also provide for strong mutual fund returns when the market performs well. VA’s do have fees inherent in the products which needs to be considered when evaluating overall performance. There are fees for mortality charge (approx. 1.25%), Admin fees (approx. .25%) Mutual Fund fees (approx. .95%) and there can be additional fees if riders are added.
Riders can be added to VA to guaranteed portions of benefits:
For example, you can add an income rider which will provide predictable future income at a given date of the annuitants choice. Death Benefit riders can also be added which will guarantee that the annuity will pay out the highest value the annuity has achieved during any of its anniversary dates. This rider provides a protection against the market risk that VA’s have. The average rider cost for an income or DB rider is approximately .80% per year.
Variable annuities do base returns off of market performance:
Because of this; they are able to have substantial gains and losses in account value as a result. The income and/or death benefit rider does mitigate the risk to a certain point but they will not help to protect the account value in the event the investor wants to access it as a lump sum.
Depending on the investors goals:
Fixed indexed annuities (FIA’s) are a less risky alternative. Fixed indexed annuities provide some growth potential but they do not have risk of principal loss due to poor market performance. FIA’s also have income and death benefit riders you can add if you decide to.