Q: What is an "Account Value" (or "Accumulation Fund")?
A: A deferred Annuity works much like a restricted interest-earning bank account; except, instead of having to report the interest on your tax return each year, the interest is deferred until you withdraw money. You can make deposits and withdrawals, and it may be subject to fees. The resulting balance earns the interest.
This "bank account" feature is fundamental to all Deferred Annuities. Whether they're Fixed, Indexed, or Variable, they all operate the same way. The only difference is in how the crediting rate and fees are determined and applied.
Often times, it can be quite complicated for the Policyholder to understand just how the Insurance Company determines and applies these rates and fees.
Here are some of the typical restrictions:
At any time, now or in the future, you can use the then-current account balance (a.k.a. the Account Value). Typical uses include:
Please note: your Account Value may not be the only dollar figure used to determine values in the above items. (See "Shadow Funds" and "Minimum Guarantees".)
A: A deferred Annuity works much like a restricted interest-earning bank account; except, instead of having to report the interest on your tax return each year, the interest is deferred until you withdraw money. You can make deposits and withdrawals, and it may be subject to fees. The resulting balance earns the interest.
This "bank account" feature is fundamental to all Deferred Annuities. Whether they're Fixed, Indexed, or Variable, they all operate the same way. The only difference is in how the crediting rate and fees are determined and applied.
Often times, it can be quite complicated for the Policyholder to understand just how the Insurance Company determines and applies these rates and fees.
Here are some of the typical restrictions:
- There are limits to how much you can withdraw in any one year.
- There are penalties ("Surrender Charges") for closing the account early.
At any time, now or in the future, you can use the then-current account balance (a.k.a. the Account Value). Typical uses include:
- Use it to purchase an Annuity (series of payments to you).
- Use it to purchase a Guaranteed Income stream (series of payments to you).
- Use it to pay a Beneficiary (in the event of your death).
- Use it to pay Long-Term Care bills (if you become disabled).
- Subject to penalties, withdraw a portion (or all), for other purposes.
- Get other financial returns (depending on the contract).
Please note: your Account Value may not be the only dollar figure used to determine values in the above items. (See "Shadow Funds" and "Minimum Guarantees".)
