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fixed accumulation feature..variable annuity
Old 03-14-2013, 11:44 PM   #1
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fixed accumulation feature..variable annuity

So, I still have a variable annuity that I inherited years ago. It will have to be dissolved next year. Late last year I moved all the investments to a money market fund and made this my de-facto emergency fund as the (after taxes) amount is about what I was looking for.

So, after looking at the available investment options, there is a "fixed accumulation feature min 3%" option. I've found some documentation on how this works, and it seems to be exactly what it sounds like, a guaranteed minimum 3% yield. If this is the case, I will put the entire balance of the fund into here until I dissolve the annuity.

The question is this: Do I understand this correctly? The documentation on this feature is very sketchy, it's not like a fund. Apparently the $$ go to the company's general fund which they invest and also make money on. That's fine, but if this is a risk free 3% tax deferred return then I want in....so, is it??
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Old 03-15-2013, 07:22 AM   #2
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Many VAs have a general account option. 3% sounds about right. It's not really risk free but is about as close to risk-free as you can get IMO. Given this is your de facto emergency fund and 3% is probably a lot more than the MM subaccount is paying, it sounds like a slam dunk to me.

Before the move I would call the insurer to make sure your understanding is correct, but it sounds right.
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Old 03-15-2013, 08:11 AM   #3
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Thanks pb. I have scoured their website (thehartford) and have found almost no info on it. I googled it, and even this turned up very little, but what I could find seemed to indicate the kind of account you describe. Seems like it has money market like risks. I emailed the company but no response. I'll try calling today.
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Old 03-15-2013, 10:05 AM   #4
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Called thehartford. Actually they were very helpful, but with the expenses they charge I'm sure they have very good employees! This is indeed fixed 3% (or more, depending on markets, but I'll bet it's 3% now). I moved everything there. I asked a question a few years ago about what to do with this account due to taxes on surrender. The advice was to: (not let the tax tail wag the investment dog). Excellent advice, but in my case when I figured out after taxes it was almost exactly what I wanted for an e-fund, I decided to hold it tax deferred until I had to dissolve it (next year). The investments went up quite a bit, but I don't want any more risk with this acct since it's my e-fund. So now, 3% tax deferred is looking pretty good!
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Old 03-15-2013, 12:16 PM   #5
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It is probably a Hartford annuity from the 90's?? They had a fixed account option with a floor of 3%. The expenses, however, are probably about 2.5% for the annuity........
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Old 03-15-2013, 02:09 PM   #6
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FD, you are tha man! That is exactly the case....and you are so right about the expenses. I'm only holding it in the annuity to delay the tax hit. With the expense hit I'll be lucky to make 1%, but the principle is safe and it's similar to a money market account. If my tax bracket takes a nosedive next year, I'll save some $$ on the tax hit, if it doesn't, there's not a whole lot of much better places to put the $$ right now anyway.
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