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Actions What to Look for When Comparing Annuities
In addition to asking your financial professional to clearly explain all of the terms, fees and expenses associated with any annuity product, it is good practice to ask the following specific questions:
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What types of annuities are available?
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There are a number of different types of annuities, but the most common are variable annuities and fixed annuities. Funds in a variable annuity are typically invested in an investment portfolio and the account value can fluctuate based on the portfolio’s performance. A fixed annuity is typically invested in a fixed account so the principal value is guaranteed. In exchange for the guarantee, the rate of return is typically lower.
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What income options are provided by the annuity?
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Fixed and variable annuities traditionally offer either immediate income or deferred income. Immediate income begins either right after or shortly after the contract is issued. Deferred income begins at a future date, which allows the account value to grow tax deferred in the meantime.
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What fees are associated with the annuity?
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Annuities typically charge annual maintenance, insurance, and portfolio fees; certain guarantees offered by variable annuities, such as optional living or death benefits, usually have additional fees. There may also be additional fees depending on the annuity provider.
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Are there any early termination (surrender) charges?
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If you withdraw money from a variable annuity within a certain time period after each purchase payment (typically seven years or less), the insurance company may assess a surrender charge commonly known as a contingent deferred sales charge (CDSC). Generally, the surrender charge is a percentage assessed on the amount withdrawn in excess of any free withdrawal (usually 10% of purchase payments per year) and declines gradually over a period of years – the surrender period.
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What are the annuitization options?
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When the time comes to start receiving income from your annuity, you will need to select a payment schedule to meet your needs. These may include payments for life, for a specified period of time (often 10, 20 or 30 years), or for a combination of the two (e.g. life with 10 years).
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Are optional benefits available?
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The suitability of these guarantees depends on your investment needs and financial profile. Your financial professional can help you determine if optional living benefits or optional death benefits are right for you.
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What is the withdrawal rate?
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As part of a living benefit, the withdrawal rate is the percentage of your total account that you can withdraw each year without penalty or reducing your income benefit. This rate is set at the time of your application and does not change for the life of your benefit. The amount of guaranteed income that you can withdraw each year may grow depending on when payments begin.
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What are the opportunities for growth?
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Annuities with optional benefits typically provide two opportunities for growth of your retirement income: the roll-up rate, and the opportunity to lock in account highs.
When you purchase optional benefits, the roll-up rate is the guaranteed growth rate of the annuity. It is set at the time your application is signed and does not change for the life of your benefit.
Some optional benefits have lock-ins, which help you capture market gains for your annuity account at a specific point of time. Typically, annuities offer the ability to lock in account highs annually, quarterly, or monthly. Some even offer daily lock-in opportunities, so no matter how the market performs your retirement income can continue to grow each day.
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Actions A financial professional can help you learn more about the advantages of adding an annuity to your retirement plan.
Learn more about how a Financial Professional can help about the value of working with a financial professional.
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Investors should consider the features of the contract and the underlying portfolios’ investment objectives, policies, management, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectus, which can be obtained on the prospectus page or from your financial professional. Please read the prospectus carefully before investing.
Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with complete details.
All guarantees, including optional benefits, are backed by the claims-paying ability of the issuing company and do not apply to the underlying investment options.
A variable annuity is a long-term investment designed for retirement purposes. Investment returns and the principal value of an investment will fluctuate so that an investor’s units, when redeemed, may be worth more or less than the original investment. Withdrawals or surrenders may be subject to contingent deferred sales charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to an additional 10% federal income tax penalty, sometimes referred to as an additional income tax. Withdrawals reduce the account value and death benefit.
Optional benefits may not be available in every state and may not be elected in conjunction with certain optional benefits. Optional benefits have certain investment, holding period, liquidity, and withdrawal limitations and restrictions. The benefit fees are in addition to fees and charges associated with the basic annuity. Please see the prospectus for more information.
Because qualified retirement plans, IRAs and variable annuities offer a tax-deferral feature, you should carefully consider the other features, benefits, risks, and costs associated with a variable annuity before purchasing one in either a qualified plan or an IRA. Before purchasing a variable annuity, you should take full advantage of your 401(k) and other qualified plans.
For Compliance Use Only: 1000622-00003-00
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