Variable Annuity Calculator
Calculate returns from variable annuities with market-linked investments. Account for fees, market performance, and various payout options to understand your potential retirement income.
Variable Annuity Results
Annual Analysis
Fee Impact Analysis
Net Return: 0.00%
Fee Drag: 0.00%
Surrender Value: $0
Note: High fees can significantly reduce returns
Understanding Variable Annuities
Variable annuities are insurance contracts that offer market-linked returns with guaranteed income options. Unlike fixed annuities, variable annuities allow you to invest in various sub-accounts that can grow with market performance, but they come with higher fees and risks.
How Variable Annuities Work
You invest money in a variable annuity, and that money is allocated to various investment options called sub-accounts. The value of your annuity fluctuates based on the performance of these underlying investments. Variable annuities offer tax-deferred growth and can provide guaranteed lifetime income.
Account Value = Contributions + Investment Returns - Fees
Returns vary based on market performance and are subject to fees
Common Fees and Charges
| Fee Type | Typical Range | Description | Impact |
|---|---|---|---|
| Management Fee | 1.0-1.5% | Annual fee for managing investments | Reduces annual returns |
| M&E Risk Fee | 1.25-1.75% | Covers insurance guarantees | Significant drag on returns |
| Surrender Charge | 5-10% | Penalty for early withdrawal | Can be costly if needed |
| Administrative Fee | $25-50/year | Account maintenance | Small but ongoing cost |
Investment Options
- Stock Funds: Equity investments for growth potential
- Bond Funds: Fixed income for stability
- Balanced Funds: Mix of stocks and bonds
- Money Market: Low-risk, stable value
- International Funds: Global diversification
- Sector Funds: Focused industry investments
Guarantee Features
- Death Benefit: Guarantees beneficiaries receive at least premiums paid
- Living Benefits: Guaranteed minimum withdrawal benefits
- Guaranteed Minimum Income Benefit (GMIB): Minimum payout guarantee
- Guaranteed Lifetime Withdrawal Benefit (GLWB): Lifetime withdrawal guarantee
- Step-Up: Account value can be locked in at higher values
Advantages
- Tax Deferral: No taxes on investment gains until withdrawal
- Market Participation: Potential for higher returns than fixed annuities
- Lifetime Income: Can provide guaranteed income for life
- Death Benefit: Protection for beneficiaries
- Flexible Contributions: Can add money over time
Disadvantages
- High Fees: Multiple layers of fees reduce returns
- Market Risk: Account value can decrease
- Complexity: Hard to understand all features and costs
- Surrender Charges: Penalties for early withdrawal
- Tax Treatment: Withdrawals taxed as ordinary income
- Illiquidity: Money locked up for long periods
Comparison with Other Investments
- vs. Mutual Funds: Variable annuities have higher fees but offer insurance guarantees
- vs. Fixed Annuities: Variable annuities offer growth potential but with market risk
- vs. IRAs/401(k)s: Similar tax treatment but with higher fees and guarantees
- vs. ETFs/Index Funds: Much higher costs for similar market exposure
When to Consider
- Maxed Out Tax-Advantaged Accounts: Additional retirement savings vehicle
- Want Guarantees: Need lifetime income or death benefit protection
- Long Time Horizon: Time to recover from market downturns
- Conservative Investor: Want market participation with some downside protection
- Estate Planning: Want to provide guaranteed income to heirs
Important: Variable annuities are complex financial products with high fees that can significantly reduce your returns. They are not suitable for everyone and should only be purchased after careful consideration of your financial situation and goals. Consider consulting a fee-only financial advisor before investing.