Funds selection for variable annuity plan at work

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Topic Author
ashg
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Joined: Mon Jan 04, 2021 6:30 pm

Funds selection for variable annuity plan at work

Post by ashg »

My employer offers variable annuity plan for some employees . I know annuities are not a good investment but in this case there is a good employer match which can only be realized if I enroll in plan. Employee contribution is a good %age and it seems like a good idea to enroll to capture employee contribution; especially since I do not get this in my 401K.

Annuity does not have any of the standard funds suggested here for 3 funds or simplified portfolio. I am looking for some help to select the right funds from the available portfolio.

My asset allocation is 80 (Equity):20 (Bond) ; and 70:30 for US : Internation stocks.

Below is the list of funds available:

AB VPS Dynamic Asset Allocation Portfolio - Class B35 - 1.06
AB VPS Small/Mid Cap Value Portfolio - Class B - 1.08
Alger Capital Appreciation- Class S - 1.18
ALPS Alerian Energy Infrastructure - Class III31 - 1.3
ALPS/Red Rocks Global Opportunity Portfolio Class III36 - 2.38
American Century VP Balanced II - 1.11
American Century VP Disciplined Core Value II - 0.95
American Century VP Inflation Protection - 0.72
American Century VP Mid Cap Value - II19 - 1
American Century VP Ultra - 0.95
American Century VP Value - 0.88
American Funds IS Asset Allocation - Class 4 - 0.8
American Funds IS Capital Income Builder - Class 4 - 0.78
American Funds IS Global Growth - Class 4 - 1.06
American Funds IS Global Growth and Income Fund - Class 4 - 0.93
American Funds IS Global Small Cap - Class 4 - 1.24
American Funds IS Growth Fund - Class 4 - 0.86
American Funds IS Growth-Income Fund - Class 4 - 0.8
American Funds IS International Fund - Class 4 - 1.05
American Funds IS International Growth and Income - Class 4 - 1.18
American Funds IS New World Fund - Class 4 - 1.09
American Funds IS U.S. Government Securities - 0.73
American Funds IS Ultra-Short Bond Fund Class 4 - 0.87
American Funds IS Washington Mutual Investors - Class 4 - 0.77
BlackRock 60/40 Target Allocation ETF V.I. - Class 337 - 0.62
BlackRock Basic Value V.I. - Class 3 - 1.01
BlackRock Equity Dividend V.I. - Class 316 - 0.92
BlackRock Global Allocation V.I. - Class 333 - 1.01
BlackRock Large Cap Focus Growth V.I. - Class 318 - 1.03
Calvert VP SRI Balanced F - 0.88
Calvert VP SRI Mid Cap Growth - 0.99
ClearBridge Variable Aggressive Growth-Class II - 1.05
ClearBridge Variable Dividend Strategy Portfolio Class II - 1.01
ClearBridge Variable Large Cap Growth II - 1.01
ClearBridge Variable Mid Cap Portfolio-Class II - 1.1
ClearBridge Variable Small Cap Growth Portfolio Class II - 1.06
Columbia VP - U.S. Government Mortgage - 0.71
Columbia VP Contrarian Core 2 - 0.98
Columbia VP Dividend Opportunity 2 - 0.99
Columbia VP Emerging Markets 2 - 1.39
Columbia VP Emerging Markets Bond 2 - 0.99
Columbia VP High Yield Bond 2 - 0.92
Columbia VP Select Large Cap Value 2 - 0.96
Columbia VP Seligman Global Tech 2 -
Columbia VP Strategic Income 2 - 0.94
DWS Alternative Asset Allocation VIP - B - 1.18
DWS Equity 500 Index VIP - B17 - 0.65
DWS High Income VIP - B - 1.11
DWS Small Cap Index VIP - B23 - 0.67
DWS Small Mid Cap Value VIP - B - 1.21
EVT Floating Rate Income - 1.2
Federated Hermes High Inc Bond Fnd II S - 1.06
Federated Hermes Kaufmann II Svc - 1.76
Federated Hermes Managed Volatility II Svc - 1.21
Fidelity VIP Emerging Mkts Svc 2 - 1.17
Fidelity VIP FundsManager 50% Service 232 - 0.8
Fidelity VIP FundsManager 70% Service 232 - 0.95
Fidelity VIP FundsManager 85% Service 232 - 1.03
Fidelity VIP High Income - Service Class - 0.92
Fidelity VIP II Contrafund - Service Class 2 - 0.86
Fidelity VIP II Inv Grade Bond - Service Class 2 - 0.64
Fidelity VIP III Growth Opp - Service Class 2 - 0.89
Fidelity VIP III Mid-Cap - Service Class 2 - 0.87
Fidelity VIP Intl Capital Apprec Svc - 1.09
Fidelity VIP Real Estate - Service Class 2 - 0.91
Fidelity VIP Strategic Income - Service Class 2 - 0.92
FTVIP Franklin Income Fund - CL 227 - 0.72
FTVIP Franklin Mutual Global Discovery Fund - CL 2 - 1.22
FTVIP Franklin Mutual Shares Fund - CL 2 - 0.98
FTVIP Franklin Rising Dividends Fund - CL 2 - 0.9
FTVIP Templeton Developing Markets Fund - CL 227 - 1.44
FTVIP Templeton Foreign Fund - CL 227 - 1.11
FTVIP Templeton Global Bond Fund - CL 227 - 0.74
Guggenheim VIF Global Managed Futures Strategy38 - 1.83
Guggenheim VIF Long Short Equity - 1.73
Guggenheim VIF Multi-Hedge Strategies38 - 1.86
Guggenheim VIF Small Cap Value - Series Q22 - 1.14
Invesco Oppenheimer V.I. International Growth Fund - Series II28 - 1.25
Invesco V.I. Balanced Risk Allocation Fund - Series II - 1.05
Invesco V.I. Core Bond Fund - Series II41 - 1.02
Invesco V.I. Core Plus Bond Fund - Series II - 0.87
Invesco V.I. Discovery Mid Cap Growth II20 - 1.05
Invesco V.I. Diversified Dividend Fund - Series II - 0.96
Invesco V.I. Equity and Income Fund - Series II - 0.82
Invesco V.I. Global II - 1.02
Invesco V.I. Main Street II - 1.05
Invesco V.I. Main Street Small Cap II20 - 1.05
Invesco V.I. Small Cap Equity Fund - Series II - 1.21
Ivy VIP Energy - 1.38
Ivy VIP Global Bond - 1.28
Ivy VIP Growth - 1.01
Ivy VIP High Income - 0.97
Ivy VIP International Core Equity - 1.17
Ivy VIP Mid Cap Growth21 - 1.1
Ivy VIP Natural Resources - 1.32
Ivy VIP Science and Technology - 1.16
Ivy VIP Small Cap Core - 1.2
Ivy VIP Small Cap Growth24 - 1.15
Janus Henderson Balanced - Service - 0.87
Janus Henderson Enterprise - Service - 0.97
Janus Henderson Flexible Bond Svc - 0.82
Janus Henderson Global Research - Service - 1.09
Janus Henderson Global Technology and Innovation- Service - 0.99
Janus Henderson Mid Cap Value Portfolio - Service - 1.05
JHVIT Financial Industries II - 1.13
JHVIT Fundamental All Cap Core II - 0.95
JHVIT Select Bond II - 0.84
JHVIT Strategic Income Opportunities II - 0.95
Lazard Retirement Global Dynamic Multi Asset Portfolio39 - 1.08
Lazard Retirement International Equity - 1.17
Lord Abbett Series Fund - Bond-Debenture Portfolio25 - 0.91
Lord Abbett Series Fund - Developing Growth VC25 - 1.04
Lord Abbett Series Fund - Fundamental Equity Portfolio - 1.08
Lord Abbett Series Short Duration Income VC - 0.86
MFS VIT II Blended Research Core Equity Portfolio - Service - 0.7
MFS VIT II Corporate Bond - Service Class42 - 0.88
MFS VIT II Emerging Markets Equity - Service Class29 - 1.48
MFS VIT II Global Tactical Allocation - 1.08
MFS VIT II International Intrinsic Value Service Class - 1.15
MFS VIT II Technology - Service Class - 1.2
MFS VIT III Global Real Estate Portfolio - Service Class - 1.17
MFS VIT New Discovery - Service Class26 - 1.12
MFS VIT Utilities - Service Class -
PIMCO Income Advisor - 0.94
PIMCO PVIT Low Duration - Advisor - 0.79
PIMCO VIT All Asset - Advisor34 - 1.38
PIMCO VIT CommodityRealReturn TM Strategy Portfolio -Advisor30 - 1.34
PIMCO VIT Dynamic Bond Adv - 1.12
PIMCO VIT Emerging Markets Bond - Advisor - 1.2
PIMCO VIT Global Managed Asset Allocation Adv40 - 1.24
PIMCO VIT High Yield - Advisor - 0.89
PIMCO VIT International Bond Portfolio (U.S. Dollar-Hedged) Adv - 1.04
PIMCO VIT Real Return Portfolio - Advisor - 0.94
PIMCO VIT Short-Term Adv - 0.72
PIMCO VIT Total Return Portfolio - Advisor - 0.79
Pioneer Bond VCT ll - 0.9
Pioneer Equity Income VCT Portfolio - Class II - 1.05
Pioneer Fund VCT Portfolio - Class II - 1.04
Pioneer Strategic Income VCT II43 - 1.04
Power Dividend Index 1 - 2.05
Principal VC Blue Chip 3 - 1.05
Principal VC Diversified Balanced 3 - 0.64
Principal VC Diversified Growth 3 - 0.66
Principal VC Diversified Income 3 - 0.62
Principal VC Equity Income 3 - 0.88
Royce Capital Small-Cap Svc - 1.33
Rydex VIF S & P 500 Pure Growth - 1.73
Rydex VIF S & P MidCap 400 Pure Growth - 1.72
TRP Blue Chip Growth Portfolio - II - 1
TRP Health Sciences Portfolio - Class II - 1.19
VanEck VIP Global Resources Fund - Class S - 1.38
Western Asset Variable Core Bond Plus II - 0.79
Western Asset Variable Global High Yield - 1.11
Last edited by ashg on Wed Jul 21, 2021 2:06 pm, edited 1 time in total.
Silk McCue
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Re: Funds selection for variable annuity plan at work

Post by Silk McCue »

I wouldn’t let a “good employer match” cause me to invest for my future in an expensive and complex insurance product.

Cheers
retiredjg
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Re: Funds selection for variable annuity plan at work

Post by retiredjg »

I didn't look at your list carefully...only searched for index funds. You have two and they are likely two of the better choices in your plan. However, it all depends on the expense ratios of each fund, which you didn't list.

It is likely the index funds have the lowest expense ratios, but you should check. And a decent bond fund or stable value fund would be a good thing to add to this list.

DWS Equity 500 Index VIP Class B
DWS Small Cap Index VIP Class B

To me there is no reason not to invest in this plan at least enough to get the full employer match. Beyond that depends on many factors not included in your post.
Rex66
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Re: Funds selection for variable annuity plan at work

Post by Rex66 »

Need to list expenses for each fund

I’d invest what gives you the max match and no more
retiredjg
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Re: Funds selection for variable annuity plan at work

Post by retiredjg »

Is this a 403b plan? Or something else? Important that you find out.

The expense ratios for your plan may be different from what is offered to retail customers. Be sure to list the expense ratios for YOUR PLAN.
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grabiner
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Re: Funds selection for variable annuity plan at work

Post by grabiner »

Silk McCue wrote: Tue Jul 20, 2021 6:53 pm I wouldn’t let a “good employer match” cause me to invest for my future in an expensive and complex insurance product.
The "good employer match" likely cancels out the expenses. If the variable annuity is after tax, the total tax cost is likely comparable to a taxable account for a stock fund, and less for a bond fund (since you defer tax on the gains); thus it is probably better to capture the match than to make a taxable investment. If it is in a pre-tax account (as a 403(b)), it is as good as any other tax-deferred account before the expenses, so it is better to capture the match than to invest anywhere else.
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Stinky
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Re: Funds selection for variable annuity plan at work

Post by Stinky »

Yes, you need to determine expense ratios for these funds within your plan.

I expect that a number of them are “obscenely” high. Hopefully, there will be a few funds that are “tolerably” high - hopefully below 1.00%.
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Topic Author
ashg
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Re: Funds selection for variable annuity plan at work

Post by ashg »

Thanks All, I updated the expense ratio for funds in the original post.

I do understand that these are higher expense ratio. I am only trying to do the amount needed to capture company match of 40%. Hopefully that makes sense.
And it is after tax contribution but as I understand it can grow tax deferred.
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Stinky
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Re: Funds selection for variable annuity plan at work

Post by Stinky »

ashg wrote: Wed Jul 21, 2021 2:08 pm Thanks All, I updated the expense ratio for funds in the original post.

I do understand that these are higher expense ratio. I am only trying to do the amount needed to capture company match of 40%. Hopefully that makes sense.
And it is after tax contribution but as I understand it can grow tax deferred.
Wow! What a hot mess of high-cost funds you have to choose from!

Would you have room in your investment allocation scheme to put ALL of this variable annuity into fixed income assets? The reason that I suggest that is that all earnings on the variable annuity will be taxed at ordinary income tax rates, rather than the lower qualified dividend and capital gains rates. Therefore, if you were to put equities into this variable annuity, you will be taxed at your marginal income tax rate when you make a withdrawal.

I agree with your desire to put only enough in to get the full match. I would then invest in the Fidelity VIP II Inv Grade Bond fund, with a cost of 0.64%.
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retiredjg
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Re: Funds selection for variable annuity plan at work

Post by retiredjg »

ashg wrote: Tue Jul 20, 2021 6:47 pm DWS Equity 500 Index VIP - B17 - 0.65
Fidelity VIP II Inv Grade Bond - Service Class 2 - 0.64
You can build a decent portfolio with these two. Put international into an IRA or taxable.


In this case, I'd put enough in to get the entire employer match and put the rest of your savings into Roth IRA. If you still have money to save after that, you could put more into this plan. Or into debt. Or into taxable.
Silk McCue
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Re: Funds selection for variable annuity plan at work

Post by Silk McCue »

ashg wrote: Wed Jul 21, 2021 2:08 pm Thanks All, I updated the expense ratio for funds in the original post.

I do understand that these are higher expense ratio. I am only trying to do the amount needed to capture company match of 40%. Hopefully that makes sense.
And it is after tax contribution but as I understand it can grow tax deferred.
A 40% match was a rather important detail to leave out of your original post.

Cheers
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ruralavalon
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Re: Funds selection for variable annuity plan at work

Post by ruralavalon »

I suggest DWS Equity 500 Index VIP - B17 - ER 0.65%.
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Topic Author
ashg
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Re: Funds selection for variable annuity plan at work

Post by ashg »

Stinky wrote: Wed Jul 21, 2021 2:41 pm
ashg wrote: Wed Jul 21, 2021 2:08 pm Thanks All, I updated the expense ratio for funds in the original post.

I do understand that these are higher expense ratio. I am only trying to do the amount needed to capture company match of 40%. Hopefully that makes sense.
And it is after tax contribution but as I understand it can grow tax deferred.
Wow! What a hot mess of high-cost funds you have to choose from!

Would you have room in your investment allocation scheme to put ALL of this variable annuity into fixed income assets? The reason that I suggest that is that all earnings on the variable annuity will be taxed at ordinary income tax rates, rather than the lower qualified dividend and capital gains rates. Therefore, if you were to put equities into this variable annuity, you will be taxed at your marginal income tax rate when you make a withdrawal.

I agree with your desire to put only enough in to get the full match. I would then invest in the Fidelity VIP II Inv Grade Bond fund, with a cost of 0.64%.
Thanks! I agree these are all pretty high expense funds and that is why i only want to do minimum amount to capture employer match. I am still building my portfolio so I can look at making this more Fixed Income Heavy. It may be a rather naïve question as I am new to this, but how will using Fixed income funds help with tax situation considering both will get taxed at ordinary income rate at withdrawl ?
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Stinky
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Re: Funds selection for variable annuity plan at work

Post by Stinky »

ashg wrote: Wed Jul 21, 2021 6:01 pm
Stinky wrote: Wed Jul 21, 2021 2:41 pm
ashg wrote: Wed Jul 21, 2021 2:08 pm Thanks All, I updated the expense ratio for funds in the original post.

I do understand that these are higher expense ratio. I am only trying to do the amount needed to capture company match of 40%. Hopefully that makes sense.
And it is after tax contribution but as I understand it can grow tax deferred.
Wow! What a hot mess of high-cost funds you have to choose from!

Would you have room in your investment allocation scheme to put ALL of this variable annuity into fixed income assets? The reason that I suggest that is that all earnings on the variable annuity will be taxed at ordinary income tax rates, rather than the lower qualified dividend and capital gains rates. Therefore, if you were to put equities into this variable annuity, you will be taxed at your marginal income tax rate when you make a withdrawal.

I agree with your desire to put only enough in to get the full match. I would then invest in the Fidelity VIP II Inv Grade Bond fund, with a cost of 0.64%.
Thanks! I agree these are all pretty high expense funds and that is why i only want to do minimum amount to capture employer match. I am still building my portfolio so I can look at making this more Fixed Income Heavy. It may be a rather naïve question as I am new to this, but how will using Fixed income funds help with tax situation considering both will get taxed at ordinary income rate at withdrawl ?
As I said above, I would advise being fixed-income-heavy in this non-qualified VA, presuming that fits into your asset allocation.

My comparison is to a regular taxable account. Fixed income in a taxable account is taxed at your marginal income tax rate (maybe 24% or more), while equity capital gains and qualified dividends are taxed at a lower rate (maybe 15% or so). Meanwhile, all income in your VA will be taxed at marginal income tax rates.

So, if you’re being tax-efficient in your choice of which assets to put in your VA vs. your taxable account, you’d put equities in the taxable account (where they receive lower tax rates than in the VA) and fixed income in the VA (where they receive the same tax rates as in the taxable account.

Now, if the comparison is the VA vs. a 401(k) or traditional IRA, the asset placement wouldn’t make any difference. All earnings in both the VA and the 401(k) will be taxed at ordinary income rates.

Does that help? Sorry that my earlier post wasn’t clearer.
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Rex66
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Re: Funds selection for variable annuity plan at work

Post by Rex66 »

The key to above is your asset allocation and the traditional view of bonds in tax deferred. Let’s just pretend that you are super aggressive and are all equities, then you ignore this and use the low cost index funds as mentioned by others. Most would recommend some bonds. Whatever percent that is for you, use the bond fund but no more. Use equities after that until max match. After max match invest elsewhere.
Topic Author
ashg
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Re: Funds selection for variable annuity plan at work

Post by ashg »

Thanks, that does make sense.
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