What Are Annuity Subaccounts?

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<h1>What Are Annuity Subaccounts?</h1><strong> Author: <a href='http://www.articleseen.com/profile_beamalife.aspx'>beamalife</a></strong><br /><p>One of the most popular types of annuities is the variable annuity. A variable annuity contract is often described as a mutual fund family wrapped in an annuity contract. This is because variable annuities offer a selection of investment options that are similar to mutual funds. The typical issuer will offer, at a minimum, a stock, a bond, and a money market fund within its variable annuity product. Many annuities offer a wide range of investment options, with up to 50 different funds. These annuity investment options are known as subaccounts. Some companies refer to these options as investment portfolios. How subaccounts work The purchaser of a variable annuity designates the subaccounts that his or her money will be invested in. The money can be allocated in any way the purchaser chooses. So, assuming that the issuer offers three stock funds, a bond fund, and a money market fund, the purchaser could elect to have each subaccount receive 20 percent of the total contribution. The purchaser could also put all of the contribution into any one subaccount. Like a mutual fund, there are investment fees associated with these subaccounts. Each subaccount charges a management fee. These fees are often lower than fees charged by mutual funds for similar investments. Keep in mind, however, that variable annuities charge additional fees to protect the insurance company against the risk that you'll live longer than anticipated, or that the company's expenses will be greater than expected. Consequently, total fees are usually higher for a variable annuity than for a mutual fund. Companies may also impose a modest transfer fee for shifting funds between subaccounts. Unlike mutual funds, funds invested in a variable annuity subaccount grow on a tax-deferred basis. No tax is paid until distributions are taken from the annuity. Note, though, that distributions taken before age 59½ are subject to a 10 percent early withdrawal penalty tax on earnings. Note: Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk, including the possibility of loss of principal. Variable annuities are sold by prospectus, which contains information about the variable annuity, including a description of applicable fees and charges. These include, but are not limited to, mortality and expense risk charges, administrative fees, and charges for optional benefits and riders. The prospectus can be obtained from the insurance company offering the variable annuity or from your financial professional. Read it carefully before you invest. </p><strong>About the Author:</strong><br /><p>Written by</p> <p> <a rel="nofollow" href="http://www.beamalife.com/term-life/term-life-insurance">Term Life Insurance Rates</a> | <a rel="nofollow" href="http://www.beamalife.com/term-life/when-does-term-insurance-not-make-sense">Term Life Insurance Quote Online</a> : BeamaLife</p><p> Article Source: <a href='http://www.articleseen.com/Article_What-Are-Annuity-Subaccounts_46181.aspx'> http://www.articleseen.com/Article_What Are Annuity Subaccounts?_46181.aspx</a></p>

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