Posted by Introduction to Securities Annuity Insurance
Securities Annuity Insurance,English called Variable Annuity, Chinese is also translated as"variable annuity", "variable annuity".
Since most of the investment targets are mutual funds, U.S. securities annuity insurance, also often referred to as "Fund annuity","Fund Insurance".
The first securities annuity insurance in history appeared in 1952 and was founded by the American College Retirement Stock Fund (CREF), which has a market history of 70 years.
Securities annuity insurance is widely used in personal pension savings and wealth management, asset risk management, tax planning, wealth inheritance and other fields.As of 2021, securities annuities have more than $2 trillion in assets under management.Securities Annuity InsuranceInsurance species, and also exclusive to the entire United StatesAnnuity marketMore than 1/3 of it.
Variable Annuity, what is U.S. Securities Annuity Insurance?
Securities annuity insurance in the United States is a contract signed by the policyholder (ie the investor) and the insurance company.
This contract helped us open a wealth management account with an insurance company.We deposit the principal in the account, and then put the principal into the corresponding sub-account.According to the market performance of the sub-account, we obtain the corresponding income.
The sub-account is usually a mutual fund, money market fund, bond fund or fixed income fund.
"principal"和"return"are two factors that affect the value of a security annuity account.
- Principal, which is the amount we pay into an annuity account.
- Return is the return our annuity account brings to that principal over a period of time.
income from securities annuity accounts,Based on the performance of our selected sub-account portfolio.
Securities annuity accounts issued by different insurance companies have different wealth management benefits and insurance benefits, but in general, all securities annuity accounts usually have four 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 stage 和 Collection stage.
TheLifeTank.com / Two-Stage Demonstration of Security Annuities
Accumulation phase of annuity account
The left side of the above figure shows the accumulation stage of account assets.We deposit principal into an annuity account and then choose to invest it in a series of sub-accounts—usually mutual funds—accumulating over time to earn principal and return asset appreciation.
for example: We applied to open a securities annuity insurance account with a one-time deposit of $10.
We choose to invest 50% of the principal ($50,000) into a bond fund sub-account, and the other 50% of the principal ($50,000) into a stock fund sub-account.
A year later, the stock fund is up 10% and the bond fund is up 5%.
At the end of the year, our securities annuity account has total assets of $107,500 (equity fund sub-account balance of $55,000 + bond fund sub-account balance of $52,500), minus costs and charges.
Receipt stage of annuity account
The right side of the picture above shows the withdrawal stage of the annuity account.In the picture above, the top of the curve is the moment we decide to start withdrawing funds from our annuity account.
From this moment on, the insurance company starts to pay us money regularly.We can choose to receive it annually, semi-annually, quarterly, or monthly.At the same time, we also have to decide how long we want the insurance company to pay.
We can opt for a "lifetime withdrawal" and the insurance company will keep paying until we die.We can also choose a 10-year or 20-year collection cycle.The shorter the collection period, the higher the single income usually.
Are security annuities worth buying?Securities Annuity InsuranceThe advantages
According to the introduction of the official website of the US government investor, the security annuity has several advantages:
1. Provide multiple insurance commitments to investors For example, if we tragically pass away during the investment period, or before taking the money from the annuity account, most annuity insurance contracts guarantee a death benefit to your beneficiary (e.g. spouse, children) .In addition, some contracts offer additional insurance commitments, such as a commitment to guarantee the principal after many years, or an amount that can be withdrawn early each year.
2. Investment enjoys tax deferral delayed taxTax-Deferred,This is a tax incentive.Investment income (capital gains) in the annuity account of the policyholder is not subject to corresponding taxes.At the same time, there is no need to pay tax when selling, purchasing funds, ETFs, indices and other investment products in the annuity account, and converting investment products.You will not receive tax bills every year during the tax season, which is one of the biggest differentiating advantages from investors who invest in their own financial management.
3. Receive funds regularly Like other types of annuity insurance, policyholders of securities annuities can choose to receive funds from their accounts on a regular basis, either monthly, quarterly, or annually.The policyholder can choose to receive it for 10 years, 20 years, or for life.This function is the biggest feature of annuity insurance, which is used to manage the longevity risk of "people are alive but have no money".
4. No income and capital limit Unlike IRAs, Securities Annuity Accounts have no income restrictions, no account opening restrictions, and no annual $5,000/6,000 capital limit.Policyholders can deposit any amount of funds at one time.
Securities Annuity InsuranceShortcomings
1. Relatively increased risk Although it has a higher return potential, the risk of security annuity insurance is higher than that of fixed income annuity insurance, and there is the possibility of losing the 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 the money is suddenly needed urgently and needs to be withdrawn from the annuity account, we will face a penalty (What is the surrender penalty).Additionally, any early withdrawals from accounts before age 59½ face a federal penalty of 10 percent.
securities annuity insuranceApplicable groups
Securities annuity insurance directly participates in the securities market, providing high earning potential.Coupled with the 4 major advantages shared in the article, securities annuity insurance is widely used by individuals and familiesFor family financial management, asset management, and family retirement pension income areas.
In general,Securities Annuity Insurancemore suitable forPursue higher earning potential, Intending to do medium and long-term financial planninggroup. (End of full text)
(>>>Recommended reading:Evaluation｜Index annuity and 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.
