Perfect Variable Annuity’s “First Choice”
Finding a variable annuity that fits starts with knowing your current size. Too often annuity products are sold to investors versus investors deciding on an annuity product that works for their specific goals and objectives. There are two primary objectives to investing in a variable annuity. First, as the definition states, they are designed to provide a periodic payment at a predefined point in the future. We call this future date – income planning. Second, is the tax-efficiency of the investment accounts. The money grows tax-deferred until you withdraw the money from the contract. This allows you to manage your money actively in stocks, bonds and other assets without tax when moving between investments. The following are questions to ask yourself relative to finding the variable annuity that fits you:
1) Is your primary objective return on investment? Do you want to actively manage your money in the markets?
2) Do you want to actively trade? What is your average holding period for an investment?
3) Are you willing to limit your investment selections to have guaranteed benefits?
4) Do you want income from the annuity? Now? Or 3, 5, 10 years from now? Is income a primary objective?
5) If income is a primary objective do you want it to be guaranteed? Are you willing to pay an additional fee for the guarantee?
6) Are beneficiaries a primary concern? Legacy planning?
7) Do you want your spouse to receive an income if you predecease him/her?
8) Do you want the income to provide additional benefits for Long-Term Care? Are you willing to pay an additional fee?
9) Do you care if the annuity contract has surrender charges?
The challenge as an investor is finding an investment product that meets your objectives. Most often getting everything you want from an investment can be costly. Therefore, we have to weigh out the cost of the benefits relative to the ultimate objective. Decide what you want and match it to the investment choices. If you can’t find it in a variable annuity, look somewhere else. If you can’t find it anywhere you may need to consider breaking your goal up and finding investments that deliver the parts to make up the whole.
The “First Choice” variable annuities below are ones that offer specific options at best value or cost. For example: Jefferson National Monument Annuity offers you more than 360 choices; active trading options in addition to long term investment options and all for a flat fee per month. Cheap and flexible. However, it doesn’t offer an income rider or any other benefits. It is simply an investment driven variable annuity to maximize tax-efficiencies over time. If that meets your objectives, it is the annuity to consider. If not, we have other “First Choice” variable annuities described below that meet the most common objectives of investors. If you don’t see one that fits, send us an email with your specific objectives to Info@PerfectVaribleAnnuity.com and we will find it, if it exists.
Jefferson National Annuity – Monument Advisor
As they state on their website, “Finally a VA built for tax-efficient investing.” This is a product built exactly for that purpose. The features of the annuity are as follows:
1) Flat Fee of $20 per month
2) 360+ Sub-Account Funds to Choose From
3) Optional Death Benefit Rider 0.2% per annum
4) NO Income Riders or other features
5) NO Surrender Charges or Up Front Fees
If you are looking for a tax-efficient investment product with low cost this is the one.
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Fidelity Personal Retirement Annuity
Fidelity offers a low-cost variable annuity that allows you to save more for retirement on a tax-deferred basis. This is a stripped down variable annuity focused on low cost and minimal fuss to manage. The features are as follows:
1) NO Surrender Fees or Up Front Fees
2) 0.25% Annual Annuity Fee (Death Benefit)
3) 54 Sub-Account Fund to Choose From
- Trading Restriction on number of transfers per year (12 currently above that incurs an additional fee)
- Frequent trading can brand you as a market timer and they reserve the right to cancel the contract
4) NO Income Riders or Other Features
This is another alternative for a tax-efficient investment product with low-cost.
Vanguard Variable Annuity
Vanguard as expected a low-cost option variable annuity product. This is a product built for tax-efficiency with a long-term buy-and-hold strategy. Trading in this product is strongly discouraged. They have taken the steps to limit the number of transactions and instituted penalties for those who do. They also reserve the right to cancel the contract. Thus, for those looking for a long-term strategy of tax-deferral this is the one. The features for the annuity are as follows:
1) NO Surrender Charges or Up Front Fees.
2) 0.20% Annual Annuity Fee (Death Benefit)
3) 17 Sub-Account Fund to Choose From (See Account Restrictions Above)
4) 0.95% Annual Fee. Optional Guaranteed Living Withdrawal Benefit Rider
This is another low cost alternative for long-term oriented investors. The investment restrictions and limited choices are a drawback, but it is still an option for investors. The guaranteed living withdrawal benefit is a feature many annuities offer today. Vanguard is one of the few low-cost providers to offer the rider as an option for investors. Weigh out your options before choosing any additional riders on an annuity contract.
TransAmerica Advisor Elite Variable Annuity
This is an alternative to all the heavily fee and commission loaded variable annuity contracts being sold around the country. TransAmerica designed this product for the advisor community, thus the name. I cannot call this a low cost product because of all the riders offered to the owner of the contract. It does offer the same tax-efficient investment opportunities. The following are the features of the contract:
1) NO Surrender Fees or Up Front Fees
2) 0.45 – 1% Annual Death Benefit Options
3) 0.45 – 1.4% Living Income Benefit Options
4) 62 Sub-Account Fund Options – some restrictions if you chose the Living Income Benefit Option.
5) Maximum Contribution of $1,000,000 per contract owner.
With the additional fees this product is designed for the investor who wants guarantees for retirement income. It does limit the upside participation in the market performance and at the same time charges higher fees. This product requires a clear understanding of the riders before making an investment choice. On the positive side the fees are 50-70% less than the commission driven products with similar benefits and have no surrender charges allowing you to move your money at any time.
Ameritas No-Load Variable Annuity
This is an additional alternative to all the heavily fee and commission loaded variable annuity contracts being sold around the country. The reason for this contract was to give the investor even more choices to choose from the rider category. You cannot call this a low cost product because of all the riders offered to the owner of the contract. It does offer the same tax-efficient investment opportunities however. The following are the features of the contract:
1) NO Surrender Fees or Up Front Fees
2) 0.6% Annual Death Benefit Options
3) 0.95 – 1.1% Living Income Benefit Options (guarantees 5% compounding growth for 10 years)
4) 60+ Sub-Account Fund Options – some restrictions if you chose the Living Income Benefit Option.
5) Fixed Account Choice with a minimum 1% yield
6) Maximum Contribution of $1,000,000 per contract owner.
With the additional fees this product is designed for the investor who wants guarantees for retirement income. It does limit the upside participation in the market performance and at the same time charges higher fees. This product requires a clear understanding of the riders before making an investment choice. On the positive side the fees are 50% less than the commission driven products with similar benefits and have no surrender charges allowing you to move your money at any time if you decide you don’t like the contract.
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