VARIABLE ANNUITY
Annuity is a tax deferred investment. A holder of a life assurance company will, for instance, get tax relief while earning a tax free interest on an increasing sum of money. While the fixed annuity investments have a sure, a guaranteed rate of payment or interest upon the completion of the specified time, the case with variable annuities is not the same. The latter have mutual funds pooled from insurance policies of holders which do not carry a definite rate of payment on it. The rate is to vary depending on how markets are, increasing and decreasing at times.
The account receives funds regularly and keeps on growing. In variable annuity, the rate of returns are determined by existing factors. If the company is doing well, its rates of returns will be better. The opposite holds true should there be a crunch of some kind. The holders would lose out by getting the value declared by the companies as deemed appropriate.
Mutual funds in the variable annuity provide varying payments depending on the periodic payments made to the investment company. The investor can choose an accelerated rate of investment that grows at an increasing percentage per year to increase on the rate of returns to the investor. To protect the public from mismanagement and exploitation, variable annuities are regulated by government body, the SEC (Security Exchange and Commission) which declares the variable annuities as a security or not depending on options selected.
This is a great investment method that pays back at the end of the agreed contract which can be five, ten or even fifteen years, paying to the company and receiving funds with interest from it at specified time or upon maturity.
