Annuities
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Annuities

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What are annuities?

How annuities work

Different types of annuities work differently. Which one may be suitable for you depends on your individual needs and goals. A financial professional can help you determine which annuity may be right for you.

Fixed annuities:

  1. You give the insurance company money in one or more payments.
  2. The insurance company places the money in its general account and then invests it on behalf of all annuity owners.
  3. Later, the insurance company credits your annuity with interest under the terms of your contract, while offering protection from loss of principal.
  4. Any interest growth in your annuity will be tax-deferred, and after a period of time specified by your contract, you may then receive the amount allowed by your contract in a lump sum, over a set period of time, or as income for the rest of your life.

Keep in mind that if you withdraw money earlier – or in a greater amount – than your contract allows, fees and penalties (such as surrender charges) may apply, including a 10% federal additional tax for withdrawals prior to age 59½. All distributions are also subject to ordinary income tax.

Fixed index annuities:

  1. You give the insurance company money in one or more payments.
  2. The insurance company places the money in its general account and then invests it on behalf of all annuity owners.
  3. Later, the insurance company may credit your annuity with interest based on positive changes in an external index of your choice, such as the S&P 500, while offering protection from loss of principal. Some fixed index annuities let you choose from a number of available index options, while others may offer limited choices. Because fixed index annuities are fixed insurance products, at no time is your contract’s value invested directly in the stock market. Interest credited may be limited or reduced by a variety of factors, such as caps, spreads, or participation rates.
  4. Any interest growth in your annuity will be tax-deferred, and after a period of time specified by your contract you may then receive the amount allowed by your contract in a lump sum, over a set period of time, or as income for the rest of your life.

Keep in mind that if you withdraw money earlier – or in a greater amount – than your contract allows, fees and penalties (such as surrender charges) may apply, including a 10% federal additional tax for withdrawals prior to age 59½. All distributions are also subject to ordinary income tax.

Variable annuities:

  1. You give the insurance company money in one or more payments.
  2. The insurance company lets you choose from a variety of investment options. Some variable annuities let you choose from a number of variable investment options, while others offer a pre-determined mix of investments.
  3. Over time, your contract’s value may increase – or decrease – depending on the performance of the investments you choose. Variable annuities involve risk, and it is possible to lose money.
  4. Any growth in your annuity will be tax-deferred, and after a period of time specified by your contract you may then receive the amount allowed by your contract in a lump sum, over a set period of time, or as income for the rest of your life.

Keep in mind that if you withdraw money earlier – or in a greater amount – than your contract allows, fees and penalties (such as surrender charges) may apply, including a 10% federal additional tax for withdrawals prior to age 59½. All distributions are also subject to ordinary income tax.

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, and the reassurance of a death benefit for beneficiaries.

I will be happy to answer any questions you may have.

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