Variable Annuities Add Guarantees

A recent survey of financial advisors revealed that 83% of their investor clients aged 55 to 70 think that a guaranteed income is more important than above-average investment gains.¹

Investors who would rather not choose between these two options may want to consider variable annuities with living benefit guarantees, which are available at an extra cost.

A variable annuity is a long-term financial vehicle designed for retirement purposes. The contract holder makes payments to an insurance company in exchange for the promise of a future income stream or a lump-sum payment. The insurance company invests some of the payments in subaccounts selected by the investor that pursue investment gains in various asset classes, including stocks.

Because it is possible for these subaccounts to lose money, some variable annuities offer living benefit guarantees to limit the downside risk. These benefits are designed to help ensure that the contract reaches a minimum value, provides a minimum income amount, or guarantees an income for a specific period, even if the investment subaccounts underperform.

There are contract limitations, fees, and charges associated with variable annuities, which can include mortality and expense risk charges, sales and surrender charges, administrative fees, and charges for optional benefits. Withdrawals reduce annuity contract benefits and values. Variable annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. Withdrawals of annuity earnings are taxed as ordinary income and may be subject to surrender charges plus a 10% federal income tax penalty if made prior to age 59½. Any guarantees are contingent on the claims-paying ability of the issuing company. Because variable annuity subaccounts fluctuate with changes in market conditions, the principal may be worth more or less than the original amount invested when the annuity is surrendered.

Variable annuities are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

1) AARP, 2009

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by StoneRiver–Emerald. © 2009 StoneRiver, Inc.