Annuities

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Frequently Asked Questions

With a variable annuity, you select investment options, often called sub-accounts, within the annuity. The value of your account—and the income you receive—depends on the performance of these investments. Growth is tax-deferred, allowing you to accumulate more over time without paying taxes during the accumulation phase. However, the value is subject to market fluctuations, and returns are not guaranteed. For guaranteed income, you can choose to receive payments for life or a specific period.

Fixed annuities offer guaranteed growth at a fixed rate for a specified time, with tax-deferred earnings that help you accumulate more assets. Your principal is protected from market uncertainty, and you can opt for guaranteed income either for life or a set period.

Indexed annuities provide growth potential linked to a market index’s performance, with a level of protection if the index performs poorly. You’re not directly invested in the index or the market. Fixed Indexed Annuities (FIAs) offer lower potential returns in exchange for full principal protection, while Registered Index-Linked Annuities (RILAs) offer higher return potential with limited protection from market losses. Like other annuities, growth is tax-deferred, and you can choose to receive guaranteed income for life or a specific period.

Income annuities convert your assets into a guaranteed income stream for life or a specific term. These are often used to cover essential retirement expenses. You can also add a cost-of-living adjustment for an additional cost to help combat inflation.

The guarantees provided by annuities depend on the financial strength and claims-paying ability of the issuing insurance company.

Depending on your needs, annuities can be a valuable addition to your financial plan.

Variable annuities offer competitive pricing, with no surrender charges and fees well below the industry average. For an additional cost, you can add a living benefit that guarantees lifetime income based on your original investment or annual gains. These annuities also provide the potential for tax-deferred growth and optional death benefits, giving you confidence that your assets are protected for your beneficiaries.

Fixed annuities may suit you if you seek guaranteed growth and principal protection, provided you have other funds for liquidity needs for 3 to 10 years.

Indexed annuities offer growth potential tied to a market index, with protection if the index performs poorly. Registered index-linked annuities offer higher returns with limited protection from market losses, while fixed indexed annuities provide full principal protection with lower return potential. These annuities can also offer lifetime income with an optional withdrawal benefit and a guaranteed death benefit to protect your assets for your beneficiaries.

Income annuities provide a guaranteed, steady income stream that you can’t outlive, helping to cover essential retirement expenses. If you need income immediately, a single premium immediate annuity might be right for you. If you need income in the future, a deferred income annuity could be a better fit.

Before making any changes to your existing annuity, it’s essential to consider surrender charges, potential loss of guaranteed benefits, and differences in features, costs, and company strength to ensure the exchange is beneficial.

Annuity fees vary by product and may include insurance charges (for the guarantees provided by the insurer), surrender charges (for early withdrawals or policy cancellations), investment fees (for managing underlying investments), and fees for optional living and death benefits.

Withdrawals from an annuity reduce its value and the death benefit. Withdrawals of taxable amounts are subject to ordinary income tax, and if made before age 59½, they may incur a 10% federal tax penalty.

Early withdrawals may also be subject to surrender charges or market value adjustments. For registered index-linked annuities (RILAs), which are complex products, early withdrawals before the index term ends are calculated using an Interim Value, which may not reflect actual index performance. RILAs carry a risk of principal loss if negative index returns exceed the protection level, with gains or losses assessed at the end of each term.

Consulting with an annuity specialist can help determine which annuity best fits your retirement strategy.

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