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4 MIN READ | OCTOBER 2022

Debunking the myth that variable annuities limit investment options.

This is the second in a series of articles to help you overcome common objections to variable annuities (VAs). Each month we’ll tackle a common myth and offer facts and information to help you build trust in variable annuities.
A shopper is shown with her many retail purchases; she likewise should have many options when choosing investments.

Do variable annuities limit investment options?

One of the common misconceptions about VAs is that there are too few investment options compared to other retirement income products.

The truth:

Depending on which VA your clients buy, they could have more than 100 investment options to choose from.
VAs come in two basic varieties—those focused on creating a source of guaranteed income and those focused on growing investments. Both provide market-based investment opportunities but serve different financial goals.
If your clients are actively investing, near retirement, and don’t want to delay retirement due to market losses, providing them with a source of guaranteed income can be a comfort in these times of market volatility.
But if a client’s goal is to accumulate assets they may want to consider an investment-focused annuity.

Customized investment portfolios

VAs focused on accumulating assets have a variety of subaccount investment options. This allows your clients to invest in different asset classes, an important way to help minimize their investment risk.
It also gives your clients the freedom to create customized investment portfolios that fit their goals—pro growth, risk adverse, or cost conscious, for example.
You can use any of these approaches or clients can create their own portfolio to allocate their investments. Once you’ve helped a client determine their financial goals and they've allocated accordingly, the annuity’s rebalancing feature can keep their investments in line with goals.

Diversifying assets: A big advantage

There’s one big advantage to diversifying assets within a VA: If your clients' financial goals change and they want to adjust their investment choices, it’s easy to do in a VA. (And money can be moved between subaccounts with no tax consequences or additional product fees.)
They can diversify their portfolios by asset class, investment strategy, or management style. With the Principal® Pivot Series Variable Annuity, for example, there are three different tracks designed to match your clients' investment preferences.

Personalized: a build-your-own investment portfolio strategy

Clients create a portfolio based on their investment objectives with no limit to the number of investment options they can choose.

Guided: direction on investments to meet risk profile and investment objectives

This strategy is for clients who want more help. We’ve partnered with Morningstar Investment Management, LLC to create five asset allocation models to align with individual risk profile and objectives.

Managed: a “we’ll do it for you” approach with asset allocation models

This is for clients who want to invest to achieve a specific outcome such as target date, target risk, managed volatility, etc. This strategy provides different allocation approaches, each with a mix of stocks, bonds, and other investment options, and includes both active and passive investment approaches.

Bottom line, VAs can offer plenty of investment options for your clients.

Wide range of investment options

Here’s an example of the range of investment options available in our Principal® Pivot Variable Annuity—all managed by well-known investment managers
You can use any of these approaches or clients can create their own portfolio to allocate their investments. Once you’ve helped a client determine their financial goals and they've allocated accordingly, the annuity’s rebalancing feature can keep their investments in line with goals.
  • Short-term fixed income
  • Fixed income
  • Large U.S. equity
  • Small/Mid U.S. equity
  • Specialty
  • International equity
  • Real assets
  • Alternatives
  • Managed volatility

For financial professional/institutional use only. Not for distribution to the public.

Variable annuities are for long-term investing. The value of the security will fluctuate so that when redeemed, shares or units may be worth more or less than the original cost.

Guarantees are based on the claims-paying ability of the issuing insurance company.

Investing involves risk, including possible loss of principal.

Asset allocation and diversification do not ensure a profit or protect against a loss.

Annuity products and services are offered through Principal Life Insurance Company. Securities offered through Principal Securities, Inc., member SIPC, and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.

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This information is educational only and provided with the understanding that Principal® is not rendering consulting, legal, accounting, investment or tax advice. You should consult with appropriate individuals including counsel, financial professional or other advisors on all matters pertaining to business, legal, tax, investment or accounting obligations and requirements.


Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA 50392.

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