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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.

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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

Annuities are long-term investments designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Optional riders have limitations and are available for an additional cost through the purchase of a variable annuity contract. Guarantees are based on the claims paying ability of the issuing company. 

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.

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