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Variable Annuities 4 Advantages in 1 Product



If you’re planning for retirement and concerned about the possibility of running out of money, a variable annuity may be something to consider when planning for retirement income

What exactly is a variable annuity? A variable annuity is a long-term investment product offered by an insurance company that’s designed to help you save for retirement. You invest your money in professionally managed portfolios – similar in some ways to mutual funds. Your money grows tax-deferred until you begin taking income at a later date. There is also often a standard death benefit that is included when you purchase your annuity, to help provide a legacy for your loved ones.

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What is a variable annuity?

Unlike many other financial instruments, variable annuities bring the power of investing (choice and flexibility and tax deferral) and insurance (income guarantees and legacy protection) together in one unique retirement product.


Four advantages of Variable Annuities- Choice and Flexibility, Tax Deferral, Income Guarantee and Legacy Protection


Let’s take a look at each advantage offered by a variable annuity.

Advantage #1: Choice and Flexibility

When it comes to investing, one thing just about everyone can agree on is the importance of diversification to help avoid the risk of losing money. Most variable annuities offer a range of investment options across a variety of asset classes, strategies, styles and sectors. Spreading your money among investments can help reduce your risk in down markets.

Variable annuities also allow you to transfer money among investment options without sales or withdrawal charges.

Advantage #2: Annuity Tax Benefits

With a variable annuity, any growth in your account is tax deferred until you begin taking withdrawals at a later date (when you may be in a lower tax bracket). Thus, all the money that would have been paid annually in taxes stays in the account with the opportunity to grow until it is withdrawn. You also have the added flexibility to rebalance or strategically move money within your investments without incurring annual taxes.

A variable annuity also offers you the flexibility to rebalance or strategically move money within your investments without having to pay year-end taxes.

It's important to know that you can only take advantage of tax deferral if you buy your annuity with money from outside of “qualified” retirement accounts, such as 401(k)s, 403(b)s and IRAs (because these are tax-deferred already). Many people choose to do so anyway, because they want to take advantage of the annuity's other features and benefits, including death benefit options, range of investments and guaranteed income payout options.

If you are considering purchasing an annuity with funds from a qualified account, it's best to speak with your tax advisor.

Advantage #3: Income Guarantees

Annuities provide two ways to guarantee your retirement income:

  1. Annuitization:

    When you’re ready to start taking income, you can annuitize, which means you would turn over control of the money in the account to the insurance company in return for a regular stream of income payments in retirement.

    Those payments would continue either for life, for a specified period of time (often 10, 20 or 30 years), or for a combination of the two (eg. life with 10 years). When you pass away, the insurance company would fulfill any remaining payment obligations to your beneficiaries for the elected time period, and keep any remaining money.
  2. Optional Lifetime Income Guarantees:

    In addition to annuitization, today’s annuities offer living benefits, for an additional fee, that function in a similar way to annuitization, but with more flexibility. These benefits provide income guarantees - including lifetime income - that essentially insure your future income, without giving up total control of your money.

    When you purchase a variable annuity with an income guarantee, your future income level can be protected even if your account’s investments perform poorly. In addition, some living benefits offer guaranteed income growth as well as the opportunity to capture gains when the market goes up. Once you begin taking income you can withdraw up to a specific amount each year as a guaranteed income stream for life, subject to the limitations outlined in your contract.

    Typically, these optional lifetime income benefits are available for an additional fee, but also can be built into the annuity.

Advantage #4: Legacy Protection

Most annuities today offer a standard death benefit to help provide a legacy for your loved ones. It typically works like this: After the owner dies, the beneficiaries will receive at least what the owner has paid into the annuity, minus any withdrawals OR the current account value of the annuity, whichever is greater.

This death benefit is generally built into the variable annuity at no extra cost. Some annuities do offer enhanced death benefits for an additional fee.

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Variable annuities offer a unique combination of insurance and investment benefits:

  • choice and flexibility
  • tax deferral
  • the opportunity for guaranteed lifetime income
  • legacy protection

These advantages can provide great value, particularly to investors looking to add more comfort and security to their retirement.

Talk to your financial professional about whether a variable annuity is right for you.

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​This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contac​t a financial professional.

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.

Diversification does not ensure against loss in a declining market.

For Compliance Use Only: 1000625-00002-00

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