VALIC: VALIC (The Variable Annuity Life Insurance Company), a subsidiary of American International Group, Inc. (AIG), is an industry leader in providing tax-qualified retirement and investment programs to employees of education, healthcare, public sector and other organizations. VALIC ranks in the top 10 of all US. and Canadian life insurance companies, based on its $62 billion in assets. VALIC has high financial-strength ratings from the major, independent industry analysts. The ratings apply to the claims-paying ability of The Variable Annuity Life Insurance Company (VALIC), not to the safety or the performance of the variable options.
Variable annuity: A tax-advantaged retirement-planning and payout vehicle offered only through a life insurance/annuity company. A variable annuity serves as an accumulation vehicle prior to retirement by accepting contributions and providing the investor with a choice from among variable-return investment options. It serves as an income vehicle, starting at retirement, and bases its income payments on the performance of the underlying variable-return investments.
Variable Investment Option: A fund that has a rate of interest that varies with the performance of the funds in the underlying account.
Variable universal life insurance: A form of life insurance within which the benefits, payable upon death or surrender and/or the premium vary with the investment performance of the assets backing the contract. These contracts usually include a choice of investments, such as stocks, bonds, money market accounts, etc. Earnings from variable life policies are tax-deferred until distributed.
Variation in returns: See "Historical variation ranges."
Vesting: A participant’s right of ownership to the money in his or her plan account. A participant’s contributions and their earnings are always 100% vested; however, company contributions and employer matching contributions may become vested over a period of time.
Volatility: Accepted by academics and financial planning practitioners as a representation of risk, expressed statistically as the standard deviation, which analyzes the fluctuation of returns of an investment around an average. Also defined as the tendency of a security or market to fluctuate in price.
Wall Street Journal symbol: The symbol under which an investment option is listed in The Wall Street Journal. This symbol may be different in other newspapers.
Whole life insurance: Form of life insurance policy that offers protection in case the insured dies and also builds cash value. The policy stays in force for the lifetime of the insured, unless the policy is canceled or lapses. The policyholder usually pays a set annual premium to whole life, which does not rise as the person grows older, as in the case with term insurance. Whole life insurance is also known as ordinary life or permanent life insurance.
Will: A written document that allows a person, called a testator, to determine the disposition of property at his or her death.
Yield: In general, the amount of profit on an investment of capital. For stocks or bonds, it is the rate of annual dividends or interest expressed as a percentage of the current market price.
Yield equivalence: The rate of interest at which a tax-exempt bond and a taxable security of similar quality provide the same return. To calculate the yield that must be provided by a taxable security to equal that of a tax-exempt bond for investors in different tax brackets, the tax-exempt yield is divided by the reciprocal of the tax bracket (100 less 28%, for example) to arrive at the taxable yield. To convert a taxable yield to a tax-exempt yield, the formula is reversed, that is, the tax-exempt yield is equal to the taxable yield multiplied by the reciprocal of the tax bracket.
Yield to maturity: The yield of a bond were it held to maturity, including purchase price, coupon rate and present value.
Zero coupon bonds: Debentures and/or guaranteed debt securities issued at a discount of their redemption price. The investor's return is equal to the difference between the face amount of the bond, which is paid to the investor at maturity, and the purchase price.