Variable Immediate
Annuities

What is a variable, immediate annuity?

A variable, immediate annuity is an insurance product designed to produce pay-outs that will vary depending upon the performance of the investment options you choose. At the time you pay your premium to purchase the annuity, you choose from several underlying investment options (called sub-accounts). The sub-accounts, in turn, invest in underlying securities that can range from stocks to bonds to money market instruments. You choose the investment options based your assessment of their potential performance and on your own risk tolerance.

Unlike a fixed, immediate annuity, you may make some changes to your variable, immediate annuity after the pay-outs begin. You may change your investment options as frequently as your particular annuity allows. You may not, however, change your pay-out option.

Example

Mr. and Mrs. Smith, ages 72 and 71, have a sum of money that they would like to use to purchase an annuity. They have discussed with their financial advisor that they already have enough income to fund their retirement. They would like to purchase an annuity and be able to choose their investment options with the potential of profiting from favorable performance. Because the Smith’s are savvy investors, their financial advisor suggests a variable, immediate annuity because they want to receive pay-outs immediately, but they do not need a defined pay-out.

What are the advantages of a variable, immediate annuity?

• Ability to choose underlying investment options
• A stream of periodic income payments**
• Potential for higher returns than a fixed annuity.

   ** Taxable Distributions (and certain deemed distributions) are subject to ordinary income tax.

What are the disadvantages of a variable, immediate annuity?

 

• Pay-outs are not guaranteed - they are subject to market fluctuations.
• No guaranteed return of principal.
• No liquidity. The only way that withdrawals can be made from an immediate annuity is if there is a commutation provision written in your annuity.
• Subject to investment management fees and other charges.

For what type of investor is a variable, immediate annuity suitable?

• Is willing to have his or her periodic pay-outs fluctuate
• Does not mind managing his or her investments.

Can one make withdrawals from a variable, immediate annuity?

No. The only way you can make a withdrawal from a variable, immediate annuity is if there is a commutation (cancellation) provision written in your annuity contract.

What pay-out options are available from a variable, immediate annuity?

Most annuities offer several standard pay-out options - ranging from pay-outs for a specified period of time (Period Certain) to pay-outs for life.