Variable Annuity Death Benefit
This article will explain what the Mortality and Expense fee (aka death benefit fee) is and how it is applied each year to your variable annuity contract.
This annual fee is approximately 1.20 % of your account value.
The above illustration shows a person invested $225,420 in contributions into the annuity. With the M&E expense paid from your account, your account was worth $494,343. Choosing not to pay a M&E expense, you could have earned $612,377. Wouldn’t you prefer to have that $118,034 for your retirement needs?
With variable annuities, if you die your beneficiary will receive the greater of the current value of your account OR total contributions to the policy at the time of death. EXAMPLE: Assume after 10 years you have invested $100,000 in your 403(b). What happens if you die? Outcome A: If your account is worth more than $100,000 your beneficiary will inherit the entire amount. Outcome B: If your account is worth less than the contributions you have made, your beneficiary will receive a check for $100,000. 1
In our next article we will discuss the other 403(b) option, custodial accounts.
If you are interested in speaking with John Carbonara to review your present 403(b) plan, you can book an appointment below using his online calendar. This is a complimentary service to educate and increase awareness. We look forward to hearing from you.
- Source: investor.gov/introduction-investing/
Continue to our next article 403(b) Custodial Accounts - Mutual Funds
Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Guarantees are based on the claims-paying ability of the issuer. Withdrawals made prior to age 59½ are subject to a 10 percent IRS penalty tax, and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available subaccount portfolios will fluctuate, so the value of an investor’s unit, when redeemed, may be worth more or less than the original value. Optional features available may involve additional fees. When considering using variable life insurance policies for supplemental retirement income, it’s important to note that underperformance of the policy’s subaccounts may require increased premium payments to prevent a policy lapse. In the event of a policy lapse or termination, outstanding loans will be deemed a taxable payment to you as the investor. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
