HOW AN ANNUITY WORKS

YOU MAY NOT BE FAMILIAR with

annuities, but they have a rich history dating back to Ancient Rome. In fact, millions of Americans currently use annuities to help their retirement savings grow and to create protected income that can help cover essential expenses and contribute to a more enjoyable retirement.

In its simplest terms, an annuity is a contract between an individual (or married couple) and a life insurance company. You can purchase an annuity with a portion of your retirement savings in either a single payment or with multiple payments, depending on the type of annuity. Once you own an annuity, any growth in your account may be on a tax-deferred basis while you continue to have control of your money, as needed.

Annuities can be an important part of a diversified retirement portfolio because they can ensure that your retirement income is protected even when there are downturns in the market. So no matter how your other retirement investments perform, annuities can provide you with a source of protected lifetime income that few other financial products can offer.

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Certain types of annuities offer you the flexibility to receive protected lifetime income while maintaining access to your money.

When you’re ready to take income, you may receive payments in a variety of ways depending on your needs and the type of annuity you purchased. You can choose to receive income immediately, or at a later date. Payments can be in lump sums of your choosing, in a series of payments for a specified period of time or you may choose to receive guaranteed payments for as long as you live. Certain types of annuities offer you the flexibility to receive protected lifetime income while maintaining access to your money.

One of the key advantages of annuities is that they are offered by life insurance companies and can offer protection and guarantees not generally found in other products. Depending on the type of annuity and the options you choose, you can get a guaranteed rate of return for your retirement money, protect your nest egg and income from drops in the market, secure a death benefit for your loved ones and, of course, have protected lifetime income for you. It’s important to remember that these guarantees are dependent upon the financial strength of the insurance company, so be sure to talk with your financial professional.

Annuities have been a reliable and trusted option for centuries. During the Great Depression, annuities saw a spike in popularity as stock market volatility threatened retirement savings and Americans were looking to protect their assets with more conservative financial products.

Today, with fewer people covered by traditional pension plans, annuities can fill a critical gap in retirement portfolios by providing a guaranteed monthly check for as long as you live, no matter how the markets perform.

“Annuities are long-term financial products designed for retirement purposes. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply. Optional income protection features are subject to additional fees, requirements and other limitations. Keep in mind, for retirement plans and accounts (such as IRAs and 401(k)s), an annuity provides no additional tax-deferred benefit beyond that provided by the retirement plan or account itself. Contract and optional benefit guarantees are backed by the financial strength of the issuing insurer.”

Annuities Explained
Annuities are flexible products and, depending on the type, can meet needs for protected lifetime income, growth and downside protection. Learn how they can help meet your needs with this simple reference PDF.
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