Index variable annuities are designed to help you accumulate assets for retirement and provide some protection for a portion of your retirement assets. An index variable annuity may be a good choice if you're willing to take on some level of risk with the opportunity to grow your assets. It's a way to participate in market gains – with a level of protection against market drops.
Index variable annuities can offer:
- Performance potential through variable options and/or index options
- A level of protection through index strategies
- Tax-deferred growth
- Income options
- Death benefit option
How do index variable annuities work?
- You give the insurance company money in one or more payments.
- Some index variable annuities let you customize your annuity contract based on your individual accumulation objectives and risk tolerance, by choosing from traditional variable options and index options.
- During the accumulation phase, your contract's value may increase – or decrease – depending on the performance of the investments you choose. Index variable annuities allow you to trade some potential gains from market growth in exchange for a level of protection from down markets.
- You defer paying taxes on your contract's gain until you receive money from the contract. Tax-deferred interest means the money in your contract can grow faster.
- After a period of time specified by your contract you may then receive the amount allowed by your contract in a lump sum, over a set period of time, or as income for the rest of your life. This is known as the distribution phase.