CREATING A PORTFOLIO
You allocate your money among the underlying funds available through the separate account of your variable annuity, also called investment portfolios. These funds are like mutual funds
and are either designed specifically for the annuity company or are versions of retail funds designated for exclusive annuity
use. But while the names of the investment portfolios may be the same or similar to those of retail mutual funds, they are not the same funds.
Your job is to choose among the underlying funds available through the separate account of your variable annuity, much as you would with a 401(k)
retirement plan or individual retirement annuity. Typically there will be a dozen or more funds, usually including stock
funds, bond funds, a money market fund, a fixed interest account and the separate account funds that are offered. Sometimes, you have an even wider choice drawn from a number of different investment management companies.
MAKING THE INVESTMENT
You can allocate your money however you like, usually on a percentage basis. For example, you might put 50% in a growth stock fund, 25% in a balanced fund, and 25% in a money market fund - or some other combination. accumulation units
, or shares, based on the unit value of the separate account fund you're putting money into. The accumulation unit value is the total value of the separate account fund divided by the number of existing accumulation units.
Each time you add money, you buy a specific number of
A BRIEF HISTORY
Variable annuities were introduced in 1952. Their history, like that of mutual funds and self-directed pension and profit-sharing plans, is directly related to the increasing responsibility individuals have for making their retirement financially secure.
When you add money to your variable annuity either in a lump sum or as incremental purchases during an accumulation period, you must decide how your assets are going to be allocated among the separate account funds you have chosen.
With many variable annuities, you can allocate a specific percentage of your contributions to each of your separate account funds at the time you buy. For example, if you invest $40,000 and have selected four funds, you might buy $10,000 worth of accumulation units in each of the funds. Or, if you invest $400 a month, you would allocate $100 into each of the funds.