What Control Will a Variable Annuity Give Me?
Fixed annuities combine preservation of principal, fixed returns and tax-deferred growth. This makes them a unique alternative to other taxable accumulation vehicles.

But what about investors who want more control over the growth of their annuities? What about investors who may be seeking greater long-term growth than that offered by fixed annuities? Fortunately, you have a choice. Variable annuities combine the tax deferral of traditional annuities with investment flexibility. This makes variable annuities a popular alternative for many types of investors.

What Is a Variable Annuity?
A variable annuity is an annuity contract that provides variable rather than fixed returns. The key feature of a variable annuity is that you have control over how your premiums are invested.

When you pay your premium, you choose from a variety of different investment “subaccounts,” such as stock, bond, and fixed-interest options. Your premium can be allocated among these portfolios. Unlike traditional annuities, which pay fixed interest, the value of your variable annuity is based on the performance of the subaccounts you select. These subaccounts will fluctuate in value and may be worth more or less than the original cost when redeemed.

A Tax Strategy
Variable annuities provide the dual advantages of investment flexibility and the potential for lower current taxes. The taxes on all interest, dividends, and capital gains are deferred until withdrawals are made.

When you decide to receive income from your annuity, you can choose a lump sum, or a fixed or variable payout. The earnings of the annuity will be subject to ordinary income taxes when you begin receiving income.

A Host of Other Benefits
Variable annuities offer a host of benefits. They are ideal for using investment strategies such as asset allocation and dollar cost averaging. Variable annuities are flexible, and they can be tailored to suit the needs and objectives of just about any investor. And insurance companies offer a variety of services to make this financial strategy easy to implement and maintain.

Considerations
As with other types of annuities, be aware of surrender charges and the 10 percent penalty for withdrawals prior to age 59½. In addition, variable annuities have management fees and other expenses, which are generally higher than those found in fixed annuities. With variable annuities, you have the options, features, and investment flexibility that may help you target and meet your retirement goals.