retirement plan outline

Separate account

·        Money is invested in separate account during accumulation period

·        Either in mutual funds

·        Or in a managed account by an investment advisor

·        Unit investment trust-$ invested in mutual funds

·        Open end management company, investment advisors manage

General account

·        Managed by insurance company

 

accumulation units

·        % share of separate account

·        Value of separate account/# of units

·        Accumulation units based on a)dividends investors get b)interest investors get c)capital gains/losses

·        Dividends, interest, capital gains-used to buy more accumulation units

Accumulation unit value

·        Calculate every day

·        Similar to NAV calculation

·        Portfolio value=accumulation unit value x #units

·        # of AU increases with payments made in accumulation period

·        Increasing units, changing values

The accumulation units that are purchased during the accumulation period represent:

·        Increasing units

·        Changing values

·        Variable annuity doesn’t have fixed values for units

·        Capital gains, interest, dividends increase units during accumulation period because more units are bought with that extra $ stream