Annuities

What is an annuity?

An annu­ity is an invest­ment through which you can receive pay­ments in retire­ment for as long as you live or for a spe­cif­ic num­ber of years. Annu­ities enable invest­ments to grow tax deferred until with­drawn. All con­tri­bu­tions to an annu­ity are made on a pre-tax basis.

What kinds of annuities are available?

  1. Fixed Imme­di­ate
    An annu­ity that is pur­chased with a sin­gle pay­ment and pro­vides guar­an­teed pay­outs right away.
  2. Vari­able Imme­di­ate
    An annu­ity that is pur­chased with a sin­gle pay­ment and pro­vides pay­outs right away. Pay­out amounts may vary based on invest­ment per­for­mance.
  3.  Deferred
    A deferred annu­ity delays income pay­ments until the investor choos­es to receive them.
  4. Fixed
    A fixed annu­ity makes steady, pre­dictable pay­ments to the investor for a spe­cif­ic num­ber of years. Pay­ments may not keep pace with infla­tion.
  5. Vari­able
    A vari­able annu­ity pro­vides income pay­ments to the investor that are con­tin­gent upon the per­for­mance of the under­ly­ing invest­ments. Depend­ing on mar­ket activ­i­ty, pay­ments may go up over time, which can help pro­tect against infla­tion, or they may decrease.

Who should invest in an annuity?

Peo­ple who want a steady stream of income in retire­ment may con­sid­er invest­ing in an annu­ity. An annu­ity can serve as a stand-alone retire­ment invest­ment vehi­cle or as a sup­ple­ment to an exist­ing retire­ment income source, such as an IRA.

What are the benefits of having an annuity?

  • Mon­ey invest­ed in an annu­ity grows tax deferred. Earn­ings are taxed at your reg­u­lar income tax rate at with­draw­al.
  • There is no annu­al con­tri­bu­tion lim­it for annu­ities, allow­ing you to invest larg­er amounts for retire­ment.
  • Unlike an IRA, you can con­tin­ue to make con­tri­bu­tions past age 70 ½.
  • Unlike an IRA, you are not required to begin dis­tri­b­u­tions at age 70 ½.
  • Should you die dur­ing the accu­mu­la­tion phase, your ben­e­fi­cia­ry will receive at least as much as you orig­i­nal­ly invest­ed.
There are charges and expens­es asso­ci­at­ed with annu­ities and vari­able life insur­ance prod­ucts, includ­ing mor­tal­i­ty and expense risk charges, man­age­ment fees, fund expens­es, dis­tri­b­u­tion fees, admin­is­tra­tive fees, expens­es for option­al rid­ers and deferred sales charges for ear­ly with­drawals. With­drawals before age 59 ½ may be sub­ject to an IRS penal­ty in addi­tion to tax­es. Enhanced death ben­e­fits and liv­ing ben­e­fits are offered for an addi­tion­al cost.

Please remem­ber that an invest­ment in an under­ly­ing fund involves risk. Invest­ment return and prin­ci­pal val­ue of an under­ly­ing fund invest­ment will fluc­tu­ate, and shares, when redeemed, may be worth more or less than their orig­i­nal cost.