Best Variable Annuities for 2012

Best Variable Annuities for 2012

Here are some of the best variable annuities for 2012 and also certain features and guidelines that one should look out for before choosing one.
What is so great about a variable annuity, that several people are preferring it as a form of retirement planning and a general investment? The structure of a variable annuity is such that it corresponds to a general life insurance, that provides a payback or a return on investment. However, there is a subtle line of differentiation, between the two. Since choosing the best annuity is no doubt quite difficult, let's understand the specifications, features and merits that tend to highlight the best of annuities.

Definition and Basic Mechanism Variable Annuities

Like any other investment options, such as a mutual funds, insurance with repayment benefits and regular investment funds, annuities consist of a set of annual or periodic payments made by the annuitant or annuity owner to the insurer or annuity provider. The annuity company then invests the money into several different reliable, and well analyzed destinations and resources to obtain solid and concrete returns. These returns are then repaid to the annuitant periodically, within regular intervals. What makes, most of the annuities into quasi-life insurance policies, is the death benefit that is provided to surviving relatives, to secure their financial future.

Variable and fixed annuities are two prominent types of annuities. The pin-pointing difference between the two is the returns that are provided. A fixed annuity provides a fixed and predetermined rate of return. On the other hand, this annuity basically has a variable rate of return, which explains its name. The death benefit of the variable annuity is however, predetermined and fixed.

How to Find the Best Variable Annuity

So, how does one ascertain whether a certain variable annuity is the best one or a really good one? Well, one way is to check such an annuity is to calculate the rate of 'Return Over Investment (ROI)', which is basically the percentage ratio between amount received as return and the amount invested. However, in case of variable annuities, it is not possible, owing to the fact that such an annuity does not have fixed return. Hence, one of the best ways to analyze is to take into consideration, the features that the annuity offers. Here the features and some of the annuities offering some such features have been discussed. The annuities that have the said features and offer substantial benefits are included in the explanation of feature analysis.

Living Benefits
From the point of view of annuities as an investment, a Guaranteed Minimum Income Benefit (GMIB), is of critical importance. In a variable annuity, the GMIB is a fixed amount that is paid by the company to the annuitant. The remaining amount that is paid over the investment is variable. Some companies and annuities that provide some great GMIB's include:
  • Axa Equitable's GMIB: Guaranteed Minimum Income Benefit Rider (Accumulator Series) and GIB: Guaranteed Income Benefit Rider (Retirement Cornerstone Series)
  • MetLife's GMIB Plus: Guaranteed Minimum Income Benefit Plus Rider
Living benefits also include, Lifetime Withdrawal Benefits (LWB's). As per this benefit, you will be able to withdraw some or the other percentage/portion from the invested cash balance, without sacrificing your interest. The withdrawal beyond a certain limit would affect the returns and withdrawal beyond a certain limit is not permitted. Now, you can consider the withdrawal amount, proportion and percentage as per your convenience. However, the withdrawal facility is not provided for all annuities. It must also be noted that in some cases, withdrawal affects the death benefit amount.

Bonus is the amount that you receive over the GMIB. Now this rate of return, should be considered rather seriously, as this is basically the yield of your investment. Some companies and annuities that provide a really good bonus, include:
  • Jackson's Perspective Rewards
  • Ohio National Financial Services ONcore Xtra
  • Series Xtra by MetLife
  • PacificLife's Value
  • Vision Bonus by Allianz
Surrender and Load Charge
The next most important thing is charge for loading and withdrawing the annuity. The load and surrender are small charges that one needs to pay either while taking up the annuity or while stopping it. Rule of thumb is, the lesser this charge, the better is the annuity. Here are some annuities and their companies with low charges:
  • Intelligent Variable Annuity by TIAA-CREF
  • B Series by Prudential
  • American Legacy III C-Share by Lincoln Financial Group
  • Destination C by Nationwide
Death Benefit
Now even if you are investing to make money, death benefits are to be considered with absolute seriousness, as such an annuity also fulfills the role of a life insurance. Some of the very well paying annuities that have good death benefits include:
  • Death Benefit Rider by Ohio National Financing Services.
  • Jackson National Life Death Benefit Rider
Investment Strategies and Asset Allocation
The last thing that can be considered is the investment strategy, reputation and investment feature that is included in barrier function of the annuity company. Now, this feature differs from company to company and it is essential to get the annuity of the company which has a good investment reputation. Some really good annuity companies include:
  • Ohio National Financial Services
  • Jackson
  • Prudential
  • MetLife
  • Axa Equitable
Choosing the appropriate variable annuity is always difficult, hence make sure that you choose the annuity, by taking into consideration the aforementioned factors. Explore all features and benefits of a variable annuity thoroughly, before choosing one.