A variable annuity is a tax-deferred investment product that allows you to maintain control of your money while staying invested in the market. A variable annuity can provide you with a lifetime income stream and a death benefit for your loved ones. Guarantees are based upon the claims paying ability of the issuing insurance company.
With a variable annuity, you can either start putting a little away at a time for a long-term goal, such as retirement, or invest with one purchase payment. Over the years, your contract value has the potential to accumulate tax-deferred before you begin your income stream.
What are the potential benefits of purchasing a variable annuity?
- Lifetime income. Your variable annuity contract can provide you with a lifetime income stream when you enter the annuitization phase of your contract. In addition, if your contract has certain optional riders, you can begin to receive a lifetime income stream upon entering the lifetime annuity period.
- Tax-deferred growth. You do not pay taxes on any investment gains in your annuity until you begin taking withdrawals.
- Tax-free transfers among portfolio options. Unlike other investment vehicles, variable annuities allow you to move assets from one portfolio to another without being taxed on any gains you’ve achieved, subject to limitations described in your contract.
- Protection for your beneficiaries. When you pass away, your beneficiaries may be eligible to receive a death benefit. Your beneficiary may also be able to continue the contract upon your death.
- Optional riders. There are a variety of optional riders that will allow you to customize your contract to fit your individual situation.
Is a variable annuity right for me?
A variable annuity might be right for you if you want to protect your investment without sacrificing market exposure and access to income.
Phases of an annuity: There are two phases to a variable annuity: accumulation (pay in) and annuitization (pay out).
- Accumulation phase (pay in) – During your variable annuity’s accumulation phase, you want your Contract Value to increase as much as possible. To help you do this, we offer a variety of portfolio options to invest your purchase payments. You may continue making purchase payments throughout the life of your contract. During this phase, you may also transfer your money between portfolios (subject to limitations set forth in your contract) without paying current tax on any investment gains.
- Optional access to income – Even during the accumulation phase, you may need access to the money in your annuity.You can choose to take a single withdrawal, or set up a series of systematic withdrawals (subject to limitations stated in your contract).
- Annuitization (pay out) – When you are ready to turn your annuity into a lifetime income stream, you’ll choose when and how.If you choose to annuitize your contract, the accumulated Contract Value will be converted into an income stream based on the payment option you elect. There are a variety of payment options available to you, including lifetime payouts and payouts for a guaranteed amount of time. The amount of each payment will depend, in part, on the length of time you select for receiving payments.
Here is a helpful resource to learn more about this subject.
Variable Annuities: Learn about retirement planning
For additional information, or to determine if a variable annuity is right for you, please contact us to talk with a Financial professional.
Variable annuities are sold by prospectuses, which contain more complete information including fees, surrender charges (contingent deferred sales charges) and other costs that may apply.
Contact your registered representative to obtain current prospectuses. Please read the product and fund prospectuses carefully before you invest or send money. Investors should consider the investment objectives, strategies, risk factors, charges and expenses of the underlying variable portfolios carefully before investing. The fund prospectus contains this and other information about the underlying variable portfolios.
Early withdrawals or surrenders may be subject to surrender charges. Withdrawals are also subject to ordinary income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. For tax purposes only, withdrawals will come first from any gain in the contract. Federal and state tax laws in this area are complex and subject to change. Consult your personal tax adviser on all tax matters. Withdrawals may reduce the death benefit, cash surrender value and any living benefit amount.
There is no additional tax-deferral benefit for contracts purchased in an IRA or other tax-qualified plan because these are already afforded tax-deferred status. An annuity should only be purchased in an IRA or qualified plan if the contract owner values some of the other features of the annuity and is willing to incur any additional costs associated with the annuity.
The product features, benefits, and limitations associated with a particular variable annuity will vary from product to product and from state to state. Guarantees are based upon the claims-paying ability of The issuing insurance Company. Guarantees do not apply to the investment performance or account value of the underlying variable portfolios.
Neither asset allocation nor diversification ensures a profit or protects against loss in a declining market. Income means 1) during the accumulation phase the amount you withdraw from your annuity in a contract year. 2) during the annuitization phase, the amount you receive in annuity payments each year.
Death benefit is only available during the accumulation phase of the contract and if the Annuitant dies prior to annuitization.