An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time.* You buy an annuity either with a single payment or a series of payments called premiums. Some annuity contracts provide a way to save for retirement. […]
Like many products available in life, annuities are not something you have to buy or invest in, but are an attractive option for someone seeking guaranteed investment growth, income, or protection of principal.* There are 3 basic types of annuities: Immediate, Fixed, and Variable. Immediate Annuity – is an annuity purchased with a single premium […]
If an annuity (fixed or variable) was purchased with non-qualified or after-tax dollars, a portion of each payment is considered to be a tax-free return of principal. The remainder of the payment is subject to taxation to the extent it represents earnings. Current federal income tax law specifies that the taxable portion of annuitized payments […]
Deferred annuity contracts permit the contract owner to surrender the annuity contract during the accumulation period and receive a cash payment from the insurance company. This amount is called the cash value or cash surrender value of the contract. It equals the sum of premiums paid plus any earnings, minus prior withdrawals and charges deducted. […]
What Do Fixed Annuities Cost? A fixed annuity typically does not impose direct expense charges on the contract owner, other than surrender charges (charges for cancellation of the contract during its early years) for deferred fixed annuities. The spread, or difference between what the issuing company expects to earn and what it commits to pay […]
Once a person is ready to retire, annuities offer a number of retirement income options. The contract owner can choose to receive all the assets from the annuity at once, opt for a series of withdrawals until all the assets are exhausted, or decide to exercise the annuitization features of the contract. The following information […]
Qualified Annuities vs. Non-Qualified Annuities Annuities can be used in tax-qualified retirement plans, such as IRAs, pension or profit sharing plans, 401(k) plans, 403(b) plans, and certain governmental plans. These annuities are called qualified annuities and are typically funded with pre-tax dollars. Some qualified annuities are purchased with after-tax dollars for use with Roth accounts, […]
In the United States, commercial annuities are issued by insurance companies. When new fixed and variable products are developed, they must be filed with the state’s insurance department. Before these products can be sold, each state where they will be available must provide written approval. Because variable annuities are considered securities as well as insurance […]
Deferred Annuities: A Way to Save Money for Retirement Many people buy annuities because they want their money to grow tax deferred while they are saving for retirement, and they want a guaranteed income stream once they retire. This type of annuity is called a deferred annuity. A deferred annuity contract has two phases—an accumulation […]
Prior to about 1997, principal protection under variable annuity contracts was offered only in the case of death. In 1997 the first Guaranteed Minimum Income benefit was issued, which offered contract holders the opportunity to generate annuity income from the greater of the account value or a guaranteed minimum amount based on the premium, after […]
If a contract owner dies in the accumulation phase, a deferred annuity contract will, at a minimum, pay the accumulation value to a named beneficiary. Sometimes the contract may be continued by the beneficiary, with the beneficiary as the new owner. The contractual payout of this benefit varies by policy and can be payable as […]
Annuities are the only financial instruments available today, other than Social Security and pensions, that can guarantee* a lifetime stream of income during retirement. Along with giving retirees the financial confidence that comes from knowing they will not outlive their assets, annuities provide another important benefit—a way to increase current income. Many of today’s retirees […]
Looking to buy an annuity or invest in an annuity? An insurance rep or financial advisor can help. You can buy a fixed, fixed-index, or immediate annuity from most licensed life insurance agents in your state or a financial advisor. In order to sell annuities, individuals must have a state insurance license from the state […]
B-Share Variable Annuities Most variable annuity contracts are B-share products. They are offered with no initial sales charge, but cancellation of the contract during its early years may trigger a withdrawal charge known as a surrender charge. These charges typically range from 5 percent to 7 percent of premium in the first policy year, and […]
A variable annuity, while not designed as an estate planning tool, does offer some benefits in this area. An annuity avoids probate, provides flexibility when passing on assets to heirs, and can potentially increase the likelihood of leaving a larger estate in some circumstances. Variable Annuities Avoid Probate—A variable annuity is a contract between an […]
