Variable annuities are part of many Americans’ efforts to save for retirement. But they can be complicated, so the SEC’s Office of Investor Education and Advocacy has provided some information on the basics of variable annuities in its Investor Bulletin, “Variable Annuities — an Introduction.”
Before investing in a variable annuity, the bulletin advises investors to:
• know how VAs work;
• get the details — read the prospectus;
• understand that VAs are not appropriate for short-term investors; and
• realize that they could lose money.
When a variable annuity account is established, a holder chooses whether to receive payments from it: (1) all at once; (2) in a stream of payments over a set period; or (3) for the holder’s lifetime.
Variable annuities do entail fees and expenses that can reduce the account’s value and the return on the investment, the bulletin notes. These include surrender charges, mortality and expense risk charges, expenses for investment choices selected and charges for special features such as living benefits, enhanced death benefits and long-term care insurance.
John Iekel is a writer/editor for ASPPA and its sister organizations, including NAPA Net.
