Reading Time: 6 minutes
Market Value Adjustment (MVA) on an Annuity: What to Know
A market value adjustment, often shortened to MVA, is a feature included in some annuity contracts. It can change the amount you receive if you want to take money out.
The adjustment may work in your favor, or it may reduce the amount available to you. In most cases, the result depends on how the interest rate environment has changed since your annuity was issued.
Why interest rates matter
An MVA reflects how interest rates have changed between the time you purchase the annuity and when you take money out.
Depending on how rates have moved, the adjustment could increase or decrease the amount you receive.
When you might see an MVA
An MVA is most likely to come into play if you take more money out than your contract allows during the surrender charge period.
Many annuities allow a certain amount to be withdrawn each year without a surrender charge. But if you withdraw more than what the contract allows, an MVA may be applied.
The rules are specific to each annuity, so it is important to understand the contract before purchasing, and review it before taking an early withdrawal.
A simple way to think about it
Let’s say you purchased an annuity and later decide to withdraw more in one year than the contract’s free withdrawal amount.
Before the money is paid out, the insurance company applies the contract’s withdrawal rules. If the annuity includes an MVA, the company will also factor in how interest rates have changed.
| If interest rates have... | The MVA may... |
|---|---|
| Increased | Lower the amount you receive |
| Decreased | Increase the amount you receive |
The exact result depends on the formula in your contract.
MVA and surrender charges are not the same thing
A market value adjustment is separate from a surrender charge.
A surrender charge is a fee that may apply when you take money out during the early years of your annuity. A market value adjustment is a calculation that may increase or decrease the amount you receive for a withdrawal based on contract rules and interest rate changes.
In some cases, both may apply to the same withdrawal.
Why an annuity may include this feature
Annuities are designed as long-term financial products, and insurance companies invest premiums with that time horizon in mind. If you withdraw more than the contract allows during the surrender period, an MVA may apply to reflect changes in interest rates since the annuity was purchased.
Depending on how rates have changed, the adjustment could increase or decrease the amount you receive.
Note that on United Life’s WealthChoice FIA, the MVA does not apply to:
- Death Benefit
- Free Partial Surrender Withdrawals & RMDs
- Guaranteed Living Benefit Rider (GLBR)
- Terminal Illness & Nursing Home Confinement
What to review before you buy
Before purchasing an annuity, ask whether the contract includes a market value adjustment and when it may apply.
You may also want to review whether any withdrawals are exempt, how the adjustment is calculated, and whether it could affect values such as the cash surrender value or death benefit.
The bottom line
A market value adjustment is an annuity contract feature that may affect the amount you receive if you withdraw money early or in an excessive amount.
It is not automatically good or bad. Depending on interest rates and the terms of your contract, it may increase or decrease the amount paid to you.
Before purchasing an annuity or taking an early withdrawal, review the contract details and talk with a financial professional so you understand how the rules apply to your situation.
Want to find out more about how annuities work?
A financial professional can help explain how market value adjustments, surrender charges, and withdrawal rules may affect your retirement strategy.
*Guarantees rely on the financial strength and claims-paying ability of the issuing insurer.
ULPUB-013 07-26
Related Posts
How an Income Floor Can Help Make Your Money Last in Retirement
Wondering how you might make your money last in retirement? Learn how an income floor could cover essentials with lifetime income and reduce pressure on savings.
From Income Swings to Stability Financial Planning for Creators
Financial planning for creators: learn how to manage cash flow, stay ahead of taxes, make smarter money decisions and build a financial plan that supports your business and personal goals.
Financial Coach vs Financial Advisor: Which One Might You Need?
Financial coach vs financial advisor: Learn the key differences, what each professional does, and which one may be the right fit for your financial needs.