What Is A Variable Annuity?

what is a variable annuity

By Dana Anspach. Money Over 55 Expert

Dana Anspach has been About.com's MoneyOver55 Expert since 2008. She is also a contributor to MarketWatch as one of their RetireMentors .

Dana is the founder of Sensible Money, LLC, a fee-only (meaning they sell no financial products for a commission) professional services firm which offers retirement income planning and investment management services.

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You can also watch one of her recorded classes on YouTube called The Key to Retirement Success .

Definition:

A variable annuity, just like any annuity, is a contract with an insurance company.

With a variable annuity, you place your funds with an insurance company and you choose how the money will be invested. You choose investments from a pre-selected list of funds (these

funds are called sub-accounts inside of a variable annuity) which can range from aggressive stock funds to conservative bond funds.

Because you choose the investments, the returns will vary depending on the underlying performance of the investments you choose. This is why it is called a variable annuity. In comparison, with a fixed annuity you do not choose the investments; instead the insurance company invests your funds and provides you with a stated guaranteed return.

Most variable annuity contracts offer death benefit riders, which can provide a benefit for your heirs, and living benefit riders, which provide guarantees as to how much income you could withdraw from the policy at a later date.

Before you buy a variable annuity, read 8 Questions To Ask About A Variable Annuity. and make sure you compare the costs in the variable annuity to those in a no-load annuity .

Source: moneyover55.about.com

Category: Credit

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