Variable annuities

Key Points

  • A variable annuity can provide income in retirement with potential for growth based on the markets
  • Many variable annuities offer a wide range of investment options
  • The funds in a variable annuity generally grow tax-deferred

A variable annuity is a retirement solution that can generate income for retirement. It can benefit from the potential growth in the financial markets and offers flexibility to manage your exposure to market risk.

A variable annuity is an insurance product that is a complex, long-term investment vehicle subject to market risk, including the potential loss of principal invested.

Why variable annuities?

Variable annuities are a tax-deferred, long-term investment that accumulates assets with the option of converting into an income stream you can depend on for as long as you live.

Variable annuities can help you achieve your retirement goals in several important ways:

  • Tax advantages. Annuities generally offer tax deferral, so you don’t pay taxes on any earnings until you actually begin to make withdrawals.
  • Investment options. Your variable annuity will perform according to the underlying investment options you select. Many variable annuities offer a wide range of investment options. For example, stocks and bonds.
  • Death benefits. A death benefit feature protects your investment for your beneficiaries. Optional benefits are typically available (for an additional fee) and can potentially increase the amount you leave to your heirs.
  • Liquidity. Although annuities are designed to be long-term investments, variable annuities allow partial access to your assets. Full asset access may be an option under certain circumstances, such as nursing home or hospital confinement and terminal illness.
  • Guaranteed income. When you are ready to start using the assets you have accumulated, annuities offer you a variety of guaranteed income options. All guarantees are subject to the claims-paying ability of the issuing company and do not apply to the performance of the variable subaccounts, which will vary with market conditions.

Annuities are intended for retirement investing; therefore withdrawals made from an annuity before age 59½ may be subject to a 10% IRS tax penalty.

If you use an annuity within a retirement plan that is already tax-deferred, such as an IRA, the annuity doesn’t provide any additional tax deferral.

Take the next step

Ameriprise Financial can help you plan for a more confident retirement with variable annuities available through third-party insurance carriers and our affiliates RiverSource Life Insurance Company (RiverSource Life), RiverSource Life Insurance Co. of New York (RiverSource Life of New York).

Be sure to talk to a financial advisor about the annuity’s features, benefits, risks and fees, and whether the annuity is appropriate for you, based on your financial situation and objectives.