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What Are Annuity Subaccounts?
Oneof the most popular types of annuities is the variable annuity. A variableannuity contract is often described as a mutual fund family wrapped in anannuity contract. This is because variable annuities offer a selection ofinvestment options that are similar to mutual funds. The typical issuer willoffer, at a minimum, a stock, a bond, and a money market fund within itsvariable annuity product. Many annuities offer a wide range of investmentoptions, with up to 50 different funds. Theseannuity investment options are known as subaccounts. Some companies refer tothese options as investment portfolios. How subaccounts workThepurchaser of a variable annuity designates the subaccounts that his or hermoney will be invested in. The money can be allocated in any way the purchaserchooses. So, assuming that the issuer offers three stock funds,fivefinger shoes, a bond fund, and a money market fund, the purchaser could elect to have each subaccountreceive 20 percent of the total contribution. The purchaser could also put allof the contribution into any one subaccount. Likea mutual fund, there are investment fees associated with these subaccounts. Each subaccount charges a management fee. These fees are often lower than feescharged by mutual funds for similar investments. Keep in mind, however,salvatore ferragamo onlines, thatvariable annuities charge additional fees to protect the insurance companyagainst the risk that you'll live longer than anticipated,discounted tory burch flats, or that thecompany's expenses will be greater than expected. Consequently, total fees areusually higher for a variable annuity than for a mutual fund. Companies mayalso impose a modest transfer fee for shifting funds between subaccounts. Unlikemutual funds, funds invested in a variable annuity subaccount grow on atax-deferred basis. No tax is paid until distributions are taken from theannuity. Note,airmax 91 shoes, though, that distributions taken before age 59? are subject to a10 percent early withdrawal penalty tax on earnings. Note: Variable annuities are long-term investments suitable for retirement fundingand are subject to market fluctuations and investment risk, including thepossibility of loss of principal. Variable annuities are sold by prospectus, which contains information about the variable annuity, including a descriptionof applicable fees and charges. These include, but are not limited to, mortality and expense risk charges, administrative fees, and charges foroptional benefits and riders. The prospectus can be obtained from the insurancecompany offering the variable annuity or from your financial professional. Readit carefully before you invest. Written byTerm Life Insurance Rates | Term Life Insurance Quote Online: BeamaLife.Topics related articles:
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