Variable Annuity

Variable Annuity (VA)

Client Risk Profile: High

Protection Level: Low

Funding Source: Equity Allocations

Variable annuities (VAs) offer the greatest performance potential of all annuity types, as returns are dictated by the underlying fund allocations. While there is no downside protection like what RILAs or FIAs offer, the upside potential is unlimited. For tax-sensitive clients maxing out their qualified contributions, VAs are another tax-deferred solution they can utilize in the portfolio.

Consider a variable annuity when your client needs:

Annuity Rescue: For clients looking to move assets from their high-cost traditional annuity into a low-cost, commission-free product, a “1035 exchange” may be appropriate: Annuity Rescue may help clients achieve:

• Lower costs — if the goal is simply to achieve the lowest cost, DPL recommends using an investment-only variable annuity.

• Guaranteed income — often clients purchase an annuity because they like the guaranteed income feature. Depending on your investment approach, DPL will find the product that is best suited for you and your client.

• Tax-efficient withdrawal — if your client needs to begin taking income from an annuity, DPL can bring products and strategies to tax-efficiently withdraw funds.

• Return of premium — utilizing a 1035 exchange into a solution with a return of premium benefit can be a thoughtful way of essentially “locking in gains,” as the amount of the new premium will include any gains from the previous annuity.

Tax Deferred Growth: For high income earners, low-cost annuities can provide tax deferral to benefit portfolio growth during a client’s accumulation phase. Studies show that tax deferral can add 1.00% to 2.00% of additional net return to a client’s portfolio, when locating tax-inefficient investments within the annuity.10

Guaranteed Lifetime Income: While other product types are generally better options for guaranteed lifetime income, variable annuities can provide the greatest investment flexibility of the product types that offer this feature — potentially generating additional growth of the portfolio. It may be more appropriate to use a low-cost variable annuity during the accumulation phase and then, when the client is ready to begin taking guaranteed lifetime income payments, move into the best available income product.

Disclosures:

Variable annuities are contracts purchased from a life insurance company that are designed for long-term retirement goals and are subject to market risk, including loss of principal.

No investment strategy insures a profit or protects against losses in a down market.

All guarantees are based on the financial strength and claims-paying ability of the issuing insurance company.

The purchase of an annuity within a retirement plan that already provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefits. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to recommending the purchase of an annuity within a tax-qualified retirement plan. In addition to surrender charges, withdrawals are subject to income tax.