| Fixed Annuities | Market Value Adjustment (MVA)
There are some fixed annuities, called Modified Guarantee Annuities that include a market value adjustment (MVA) feature. This adjustment is made in the event you want to surrender your annuity or possibly in instances where you make withdrawals. One reason you might choose to do this, is if interest rates have increased substantially and you want to purchase another fixed annuity paying a higher rate—or if you need the money for any purpose. What the MVA does, in effect, is shift some of the investment risk from the company to you. The annuity company invests your premium in order to be able to pay you the rate guaranteed in your contract; it could lose money if it had to sell those investments at a discount to refund your premium plus your earnings. So it uses a fixed formula to figure the adjustment, or the amount you must pay from your earnings, for withdrawing money under these circumstances. In the event that you withdraw your premium at a time when interest rates have declined, you may receive a smaller amount. On the other hand, the annuity company could realize a gain when it sells the investments. In that situation, the market value adjustment formula may result in your receiving a higher amount. Different contracts that include MVA features may have different provisions. One of these provisions might include whether it has the right to take some of your principal to make a negative adjustment or whether you are assured the right to keep at least a minimal percentage of earnings. It is an important factor to include in your purchase decision. However, you may discover that to compensate you for the potential risk you take, fixed annuities with an MVA feature offer higher earnings potential than those offered by other fixed annuities. Another advantage is that fixed annuities with MVA features also typically offer longer interest rate guarantee periods than other fixed annuities. In other words, as with all other investment programs, what might be the best fixed annuity for one person isn't always good for another. Our planners and financial specialists can provide assistance to evaluate the alternativesand determine what would work best for your personal investment plan. |