Variable Annuity is a kind of retirement annuity as it offers death benefits and other integrated features associated with death benefits. Most of the insurance companies offer variable annuities under a condition where an investor planning for the retirement purchases a variable annuity for his retirement either by paying the lump sum amount of the annuity or it pays series of the payments to the insurance company in order to get the benefits in the exchange of the variable annuity. The structure of a variable annuity can be explained as follows:-
- A minimum payment has to be made to the company that is guaranteed along with some additional amount that depends upon the return of the investment pool offered by the company
- The payment is not guaranteed as all the payment is derived from the underlying investment pool.
- It’s on the will of the investor to get paid on regular interval of time with regular payments or to withdraw his payments at the time when needed by him
- The payment period also depends upon the choice of the investor that means the investor can choose large payments over smaller period of time or the small payments over the larger period of time.
However there are certain reasons due to which variable annuities are not recommended such as the fees, termination and the taxes issue.
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