Variable Annuity

In contrast to a fixed annuity, the key features of a variable annuity can fluctuate (they are “variable”) during the accumulation period and during the payout phase. Also in contrast to a fixed annuity, the variable annuity contract holder assumes much of the investment risk. With a variable annuity, the insurance company provides the contract holder with the ability to determine how his or her premiums are invested. One investment option is a variable account which typically consists of equity, bond or money market mutual funds. The other option is the general account of a variable annuity which provides a guaranteed return. The contract holder decides how much risk or variability they want to tolerate by allocating premium payments among the general and variable accounts. The amount of money accumulated and the amount of income during the payout phase are determined by the returns of these accounts. With a variable annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable or non guaranteed rate; 3) payments are variable and can begin immediately or at some future date.

Research Highlights Fixed SPIAs

Retirement researcher Wade Pfau published a research paper titled “An Efficient Frontier for Retirement Income .” Pfau’s paper analyzes the relative merits of equities, bonds, fixed single premium immediate annuities (SPIA), inflation -adjusted SPIAs and variable annuities with guaranteed lifetime withdrawal benefits ( GLWB ). Each of these allocation options are examined in the context of achieving retirement spending goals. Pfau creates an efficient frontier for a...

Who Provides Longevity Insurance

The U.S. longevity insurance market has been developing for almost a decade, and yet there are still...

No Time for Guarantees

The concept is seductive: a financial product that provides upside exposure in the event that equity markets trend up and to the right while also providing a floor of protection in case the bottom falls-out from under markets again.

Sort of like having your cake and eating it too. Very tempting in light of the massive financial uncertainty that has existed for the past several years.

Products playing into this “upside plus protection” theme include (but are not limited to) variable annuities with guaranteed...

What is Driving the Rush for the Variable Annuity Exit?

The variable...

Slow and Steady at SunAmerica Proving Variable Annuity Business Not as Bad as it Seems

Despite a barrage of negative press, it appears that SunAmerica ’s measured approach to the variable annuity business is demonstrating that the successful production of variable annuities is similar to most other lines of insurance . The Hartford ’s recent decision to exit the variable annuity business entirely is attributable in part to their management’s (under significant shareholder pressure) view that the VA business is capital intensive and has relatively unattractive...
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