What is a variable annuity contract?

A variable annuity is a contract between you and an insurance company. With a variable annuity, the insurance company agrees to make periodic payments to you in the future. You can purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments.

How long does a variable annuity last?

Typically, after six to eight years or sometimes as long as ten years, the surrender charge may no longer apply. Often, contracts will allow you to withdraw a portion of your account value each year without paying a surrender charge. Example: You purchase a variable annuity contract with a $100,000 purchase payment.

How does a 10 year annuity work?

A 10-year term certain annuity payout means that payments are guaranteed to be made for at least 10 years. If you were to pass away during the first year, payments would continue to your named beneficiary until 10 years after the first payment. After the initial 10 years, payments stop.

What is a 10 year annuity?

A 10 Year Certain And Life Annuity is a type of annuity that will provide payments to you for 10 years, even if you die. If the annuitant outlives the 10 years of guaranteed payments, then they would continue to receive income payments for life; however, no payments would be available for the beneficiary.

Can I buy a 10 year annuity?

MYGA’s guarantee a fixed rate of return for the entire duration of the contracts, typically ranging from 3 to 10 years. A MYGA annuity’s rate is guaranteed for the full contract term. Other types of fixed annuities still offer a guaranteed rate, though it may only be for a portion of the term.

What do you need to know about variable annuity contracts?

You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments. A variable annuity offers a range of investment options. The value of your contract will vary depending on the performance of the investment options you choose.

When do you have a surrender charge on a variable annuity?

Surrender charges – If you withdraw money from a variable annuity within a certain period after a purchase payment (typically within six to eight years, but sometimes as long as ten years), the insurance company usually will assess a “surrender” charge, which is a type of sales charge.

Is there a waiting period for a variable annuity?

Typically, a 10-year waiting period after the purchase of the variable annuity is required. Later in retirement, the contract holder may decide that annuitizing is a better choice than continuing to accumulate money in the contract or cashing it in. In this regard, some contracts limit GMIBs to annuitization methods that include a lifetime payout.

What happens when you withdraw money from a variable annuity?

Also during the accumulation phase, you may choose to withdraw all or a portion of your purchase payments plus investment income and gains (if any) as a lump sum payment. However, if you withdraw money from your account during the early years of the accumulation phase, you may have to pay “surrender charges” (discussed below).