How annuities work
An annuity is a contractual agreement with an insurance company designed to help protect you from the risk of outliving your income. Your purchase payments are annualized and converted into periodic payments that can last for life.
Annuities are flexible so you can choose one that enables you to:
- Invest a lump sum or invest over a period of time
- Start receiving payments immediately or at some later date
- Select a fixed, variable or indexed rate of return
Investing involves risk and may lose value. All protections and guarantees are subject to the claims paying ability of the issuing carrier, but do not apply to any variable accounts which involve investment risk and possible loss of principal.
Types of annuities for your investment plan
You can choose the type of annuity features that work for your situation:
- Variable – With a variable annuity, you choose investments and earn returns based on how those investments perform. depending on your investment goals, you can choose investments that offer different levels of risk and potential growth.Variable annuities are sold by prospectus. Be sure to read the prospectus carefully and consider the investment objectives, risks, charges and expenses of the annuity and its underlying investment options before you invest. Prospectuses for products and underlying investment options contain this and other important information.
- Immediate – An immediate annuity is purchased with a lump-sum and guaranteed income starts usually starts within a few months.
- Your guaranteed stream of income is irrevocable once payments begin. In some situations, funds can be accessed, but some restrictions apply.
- Fixed – With fixed annuities, the principal investment and earnings are both guaranteed and fixed payments are made for the term of the contract.
- Fixed Indexed – Fixed indexed annuities yield returns on contributions based on a specified equity-based index, such as the S&P 500. Indexed annuity contracts also offer a specified minimum, often called a “zero floor” which the contract value will not fall below, regardless of index performance. A fixed indexed annuity does not directly participate in any stock or equity investment.
Annuities May Be a Good Fit For Your Investment Plan
Nearly 50% of Americans between the ages of 57 and 63 are at risk of not having enough saved to pay for retirement. That’s a risk that you may be able to do something about. Investing in an annuity often has the objective of receiving income in the future, subject to the terms, conditions and or limitations of the insurance contract susch as surrender periods. An annuity is a long-term contract designed to help accumulate assets to provide income for retirement. In the event of an early withdrawal, penalties may apply and earnings are taxable as ordinary income and may be subject to a 10% federal tax penalty if withdrawn prior to age 59½.
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