Why People Buy Annuities

What makes annuities so popular? Annuities are products that can be useful for retirement planning because they offer a blend of protection from market risk*, credited interest, tax deferral, lifetime income and a death benefit.

Protection from Market Risk

We know when it comes to choosing insurance products; protection from market risk is an issue to consider. An annuity is an insurance contract designed to provide an income stream in retirement. They are long term vehicles and may be subject to surrender charges and holding periods. Annuities have a variety of features that may benefit you, such as:

Feature1: Through a contract, a fixed annuity guarantees* income that your premium is protected from market risk through the insurer.  With annuities, any distributions are subject to ordinary income tax, and if taken prior to age 59 ½, a 10% additional tax.
 
Feature 2: If you have a problem with the insurance company that issued your annuity contract and you would like to file a complaint or get a regulator involved, no matter where that insurance company is located, you can find a regulator located in your state.

Guarantees*
Once you have made the decision to reduce market exposure* you may want to consider your options for retirement vehicles. Many insurance carriers offer different types of annuities with minimum guaranteed* interest rates.

Tax Deferral
With deferred annuities, taxes are deferred until annuity payments begin, and then payments are subject to ordinary income tax rates. They may be subject to surrender charges and holding periods. There is a 10% additional tax for early withdrawal (before age 59 ½).

Lifetime Income
The definition of an annuity is “a fixed sum of money paid to someone each year, typically for the rest of their life” or “a form of insurance entitling the insured to a series of annual sums.”¹ Fixed annuities can help provide you with an income stream in retirement that cannot be outlived.

Beneficiary Advantages
Your retirement strategy may involve planning how your money will work after retirement as well as after death. With an annuity, you can name a beneficiary which can potentially expedite or avoid the probate process so your loved ones can receive their remaining benefits in a timely fashion.

¹ http://www.schwab.com/public/schwab/nn/articles/Two-Types-of-Annuities-for-Retirement-Income

*Guarantees are backed by the financial strength and claims paying ability of the issuing company and may be subject to restrictions, limitations, or early withdrawal fees. Annuities are not FDIC insured.

Withdrawals will reduce the contract value and the value of any protection benefits.  Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge.

All withdrawals are subject to ordinary income tax, and if taken prior to age 59 ½, may be subject to a 10% federal additional tax.