Posted by Introduction to Securities Annuity Insurance
Security annuity insurance,Called in English Variable Annuity, Chinese has also been translated into"Variable annuity", "variable annuity".
Since most of the investment targets are mutual funds, the U.S. securities annuity insurance is also often referred to as "Fund annuity","Fund Insurance".
The first security annuity insurance in history appeared in 1952. It was founded by the American University Retirement Equity Fund (CREF) and has a market history of 70 years.
Security annuity insurance is widely used in personal retirement fund savings and wealth management, asset risk management, tax planning, wealth inheritance and other fields.As of 2021, more than 2 trillion US dollars of assets have been managed in securities annuity insurance.Securities Annuity InsuranceInsurance category, also monopolizes the entire United StatesAnnuity marketMore than 1/3 of it.
Variable Annuity, what is American Securities Annuity Insurance?
Securities annuity insurance in the United States is a contract signed by the insured (that is, the investor) and the insurance company.
This contract helped us to open a financial account with an insurance company.We deposit the principal in the account, and then put the principal in the corresponding sub-account.According to the market performance of the sub-account, we get the corresponding income.
The sub-account is usually a mutual fund, currency fund, bond fund or fixed income fund.
"principal"和"Return"They are two factors that affect the value of securities annuity accounts.
- The principal is the amount we pay to the annuity account.
- The return is the return on the principal of our annuity account over a period of time.
The income of securities annuity accounts,Based on the performance of our selected sub-account portfolio.
The financial income and insurance benefits of securities annuity accounts issued by different insurance companies are also different, but in general, all securities annuity accounts usually have 4 common advantages (discussed at the end of the article).
Security annuityHow does insurance work?
The operation of Securities Annuity Insurance (Variable Annuity) is divided into two stages:Accumulation phase 和 Receiving stage.
TheLifeTank.com / Two-stage display of security annuities
The accumulation phase of annuity accounts
The left side of the figure above shows the accumulation stage of account assets.We deposit the principal into the annuity account, and then choose to invest in a series of sub-accounts-usually mutual funds-through the accumulation of time, the principal is obtained, and the return of the asset appreciation.
for example: We applied to open a securities-type annuity insurance account with a one-time deposit of US$10.
We choose 50% of the principal ($50,000) to invest in a bond fund sub-account, and the other 50% of the principal ($50,000) to invest in a stock fund sub-account.
A year later, stock funds rose by 10%, and bond funds rose by 5%.
At the end of the year, the total assets of our securities annuity account has become $107,500 (stock fund sub-account balance of $55,000 + bond fund sub-account balance of $52,500), which requires deduction of costs and expenses.
The stage of receiving an annuity account
The right side of the figure above shows the receiving phase of the annuity account.In the above figure, the peak position of the curve is the moment when we decide to start withdrawing funds from the annuity account.
From this moment on, insurance companies began to pay us funds on a regular basis.We can choose to receive it annually, half-yearly, quarterly, and monthly.At the same time, we have to decide how long we want the insurance company to pay.
We can choose "Lifetime Withdrawal", and the insurance company will continue to pay until our death.We can also choose a collection cycle of 10 years or 20 years.The shorter the collection period, the higher the single income.
Is the value of security annuities worth buying?Securities Annuity InsuranceThe advantages
Quoting the introduction of the official website of US government investors, the security annuity has several advantages:
1. Provide investors with a variety of insurance commitments For example, if we unfortunately pass away during the investment period or before taking money from the annuity account, most annuity insurance contracts will guarantee a death claim to your beneficiaries (such as spouse, children) gold.In addition, some contracts also provide additional insurance commitments, such as a commitment to guarantee the principal after many years, or the amount that can be withdrawn in advance each year.
2. Investment enjoys delayed taxation Delay in paying taxes, called in EnglishTax-Deferred,This is a preferential tax policy.The investment income (capital gains) in the insured’s annuity account is not subject to corresponding taxes.At the same time, you don’t need to pay taxes when you sell, buy funds, ETFs, indexes and other investment products in an annuity account, and switch investment products.No tax bills are received during the tax season each year. This is one of the biggest differentiating advantages from investors who invest and manage their own money.
3. Receive funds regularly Like other types of annuity insurance, the insured of a securities annuity can choose to receive funds from the account regularly, either monthly, quarterly, or annually.The insured can choose to receive it for 10 years, 20 years, or for life.This function is the biggest feature of annuity insurance, used to manage the longevity risk of "people are alive, but no money".
4. No income and capital limit Unlike individual retirement accounts, securities annuity accounts do not have income restrictions and account opening restrictions, and are not subject to the annual funding limit of $5,000/6,000.The policyholder can deposit any amount of funds at once.
Securities Annuity InsuranceShortcomings
1. Relatively increased risk Although it has higher return potential, the risk of security annuity insurance is higher than that of fixed-income annuity insurance, and there is a possibility of loss of principal.
2. Additional investment management fees Since securities annuity insurance is an investment-grade product, there are additional investment management fees.
3. There is a penalty for early withdrawal If you need money suddenly and need to withdraw from the annuity account, we will face a fine (What is the surrender penalty).In addition, any account withdrawn before the age of 59½ will face a federal fine of 10%.
Securities annuity insuranceApplicable groups
Securities annuity insurance directly participates in the securities market, providing a higher income potential.In addition to the 4 major advantages shared above, security annuity insurance is used by individuals and familiesUsed for family financial management, asset management, and family retirement pension income fields.
In general,Securities Annuity InsuranceMore suitable forPursue higher earning potential, Intending to do medium and long-term financial planningGroups. (End of full text)
(>>>Recommended reading:Evaluation｜Index annuity or fund annuity, which annuity is more suitable for you?）
appendix:
*. "Variable Annuities", https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/variable-annuities
*Disclaimer: *The specific operation and performance of different products of Variable Annuity are specified by the policies and additional terms of different life insurance brands. This article is for educational purposes only and does not constitute insurance or investment advice.
