It can be harder to compare
variable annuities
since they don’t provide a fixed
rate of return.
Instead,
you can begin by investigating the investment options each contract
offers.
What
you’re looking for is a contract that includes a group of
choices that you think will offer the best potential for growth
with the lowest
expense
ratio.
Those choices will be identified as subaccounts,
investment funds, or a similar term, and are comparable to
mutual
funds.
Among the factors to consider are each fund’s
objective, its past performance, and the portfolio manager’s
strategy. While past performance doesn’t guarantee future
returns, it can give you a sense of how the investment has fared
in up and down markets.
You can find this information for some annuity
providers in the financial tables of newspapers. It may be available
through the annuity company’s Web site or its print literature.
Or you can ask your financial adviser to provide it. Your quest
will be easier if the contract offers retail funds, which are
managed by mutual fund companies, often by the same manager that
runs a comparable mutual fund. It’s more difficult to find
information about proprietary funds, which are owned by the insurance
company.
Expense ratio
An expense ratio tells you the percentage of your account value you pay each year in insurance and management expenses (though not sales charges).
