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Real World Scenarios: Variable Annuities Purchase


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This blog post will begin a series of real life questions and answers from Annuity FYI members.

When considering the purchase of a variable annuity, should I pay attention to the total assets under management of the insurance company issuing the annuity?

Sub-accounts with smaller assets can be a benefit, primarily because a smaller sub-account is more easily managed, has fewer securities in it, and the manager(s) can pay greater attention to stock / bond selection in a smaller fund. An exception is of course in passively managed funds, such as index funds and certain sector funds, where size is mostly irrelevant.

Sometimes investors mistakenly believe that a company with a large amount of assets under management is safer and more stable. If you’re looking to determine how safe or stable a company is, take a look at the financial strength rating of the company, not the assets under management. Remember that variable annuities are held in separate accounts and as such are not chargeable with any other business that the company may conduct in their general portfolios. In other words, if the company were seized by state regulators the assets of the general accounts would be frozen (at least until things were sorted out, which can take years) and the separate accounts would be left untouched, and remain invested and accessible.

If you want to discuss in person with an licensed financial professional, please do not hesitate to contact an licensed financial professional for more information.

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