Speak with a Registered Agent: 1-866-223-2121

Speak with a Registered Agent: 1-866-223-2121

Investment-Only Variable Annuities Add Death Benefit Options


By

Investment-only variable annuities (IOVAs) are playing an important role in the annuity industry right now, in part because traditional variable annuities are taking a step back. Think Advisor’s Robert Bloink and William H. Byrnes discussed the increasing popularity of IOVAs in the article “Optional Death Benefits Broaden Investment-Only VAs’ Surge.” This type of variable annuity product doesn’t offer the guarantees that people have come to expect from traditional variable annuities, but they offer enough to make them desirable to consumers right now. They cost less, offer a different kind of investment potential and are now starting to offer some death benefits to up the ante on their demand.

These new investment-only variable annuities are tax-deferred and focus on the investment potential you can receive. They do not guarantee lifetime income, a benefit that many people have become accustomed to with annuity products. Lifetime income guarantees come with fees that are around 2-3% annually and can take away from any returns earned with traditional variable annuity products. IOVAs have much lower fees, which gives you the potential for much greater investment growth. You have a plethora of investment choices, including more well known investment portfolios, but there are also alternative investment choices that the average client doesn’t normally have access to. Through the use of hedging strategies and diversification, investment-only variable annuities create their own type of downside protection.

Although there is great investment potential with IOVAs, some advisors don’t think that alone is worth purchasing one with money that is already in a retirement account. But the added death benefit options becoming increasingly available make investment-only variable annuities desirable to an even broader range of clients. There is a standard death benefit with most IOVAs that offers a return of account value. Some new death benefit options have come across recently. You can get a lower cost return of premium benefit or you can pay more for a guaranteed minimum death benefit. Some insurers are offering a highest anniversary death benefit where you are paid out the highest value of three options. Death benefit options typically have to be added when you purchase your annuity but can be canceled anytime. Most are only an option for clients younger than age 85.

Investment-only variable annuities are not right for everyone, but they offer some unique benefits as a retirement savings growth vehicle. Investors have to be young enough to have enough time to potentially grow their money. These products often are able to provide greater growth than traditional variable annuities because of their lower fees. New death benefit options are making investment-only variable annuities even more desirable to consumers. Speak with an expert at Annuity FYI if you have any questions about IOVAs or using annuities in your retirement income planning.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+

For more information about the product mentioned in this article contact us here:

Information Request Form

If you have questions or would like more information, please complete this form and a licensed professional will be happy to help. For the fastest response, please select 'Phone' as your Contact Preference.

By providing your information and clicking 'Submit' above, you acknowledge that you have read and agree to this site's privacy policy. You also provide your consent to be contacted at the email address or phone number provided above (including any wireless number) by licensed agents or representatives from or on behalf of AFYI Holdings Group, LLC and other companies to provide the information requested and/or offer annuities or financial products. You understand that these calls or SMS messages may be generated using an automated telephone dialing system, a pre-recorded message, or artificial voice. Consent to receive such messages is not a condition to purchase any goods or services. You may opt out at any time by following the instructions in the messages you receive.  Receiving quotes and information through our website is free, and you are under no obligation to purchase any goods or services as a result of this request. You affirm that you are the subscriber of the provided telephone number or that the subscriber authorized you to provide the number. Message and data rates may apply. AFYI Holdings Group, LLC is committed to respecting your privacy and adhering to all applicable laws and regulations, including the Telephone Consumer Protection Act (TCPA).