Variable Annuities May Invest Premiums In Each Of The Following

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Our Variable Annuity Products

Is a Variable Annuity Right for Me? Pros and Cons from Fisher Investments

Provides growth potential through a wide range of investment options and add-on benefits that offer protection, guaranteed lifetime income, and the opportunity to leave a legacy.

*Add-on benefits that provide income for the length of a designated life and/or lives may be available for an additional charge. The amount of income that these benefits may provide can vary depending on the age when income is taken, and how many lives are covered when the benefit is elected. The cost of these benefits may negatively impact the contract’s cash value.

Lifetime income of the add-on lifetime benefits available with variable annuities becomes effective at issue if the designated life is 59 1/2 at issue, or upon the contract anniversary following designated life’s 59½ birthday, provided the contract value is greater than zero and has not been annualized. Jackson +Protect is not available in New York.

Tax deferral offers no additional value if an annuity is used to fund a qualified plan, such as a 401 or IRA, and may be found at a lower cost in other investment products. It also may not be available if the annuity is owned by a legal entity such as a corporation or certain types of trusts.

The latest maturity date or income date allowed under an annuity contract is age 95, which is the required age to annuitize or take a lump sum. Please see the prospectus for important information regarding the annuitization of a variable annuity contract.

Tax Implications On Annuities

You’ll have to report the money you get from an annuity as income when you file your taxes. You may have to pay tax on this money. The amount of tax you may pay will vary depending on the product. Taxes will be different if you buy your annuity using registered savings versus non-registered savings.

How To Buy Annuities

In addition to insurance firms, mutual funds companies, brokerage firms, banks and other financial institutions also sell annuities. Before you buy from any particular seller, its important to read through the contract so that you thorough understand all its nooks and crannies. The contract will explicitly state all fees and terms involved in the arrangement. If youre going for the variable annuities, the mutual fund prospectus is your most valuable information source. Make sure that you request prospectuses for all the mutual funds you are considering. Read carefully before you make a decision as to where you want your hard-earned money to be invested.

Have it in mind that if youre getting variable annuity through a tax-advantaged plan such as an Individual Retirement Account, or 401 plan, you will no further tax benefit from the variable annuity. In this case, you only want to buy a variable annuity because it makes great sense due to its other features. Another important point is that if you withdrawal all your variable annuity a short time after the purchase, your insurer will impose penalties known as surrender charge. These penalties can dramatically reduce the value of your investment.

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When To Avoid An Exchange

Exchanging a variable annuity might not be a good idea if:

  • The bonus is wiped out by the annuity company’s extra charges.
  • The new contract has unneeded features.
  • The fees for the new contract are higher than those on the old contract.
  • The contract holder is older than 59½ and is taking the tax loss.
  • Economic changes, such as lower interest rates, make the terms of the older annuity more favorable to the owner than the terms of the new annuity.
  • The current contract is worth less than what was originally paid.

In the last case, the contract owner might be better off surrendering the annuity, assuming the surrender charges are gone.

Also be aware of the following: A broker or financial planner may be getting a high commission for selling a new annuity when a low-commission product such as a stock, bond, or mutual fund might work just as well. Alternatively, the annuity company may be pushing to get owners to surrender annuities established many years ago, when interest rates were higher than at present.

Furthermore, any investment in a variable annuity should be made with the understanding that one will pay for the insurance part of the contract. Otherwise, a straight equity or fixed-income security would be more advisable.

The Death Benefit And Other Optional Insurance Features

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A common feature of variable annuities during the accumulation phase is the death benefit. If you die, a person you select as a beneficiary will generally receive the greater of: all the money in your account or some guaranteed minimum .

Example: You own a variable annuity that offers a death benefit equal to the greater of account value or total purchase payments minus withdrawals. You have made purchase payments totaling $100,000. In addition, you have withdrawn $20,000 from your account. Because of these withdrawals and investment losses, your account value is currently $75,000. If you die, your designated beneficiary will receive $80,000 .

Some variable annuities allow you to choose optional death benefits for an additional charge. For example:

Variable annuities commonly offer other optional insurance features, which also have extra fees. Many of these optional features are available only during the accumulation phase of the contract. Collectively, these features may be referred to as living benefits. Such features may include:

Remember:

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Guaranteed Minimum Accumulation Benefit

The Guaranteed Minimum Accumulation Benefit guarantees your account value will equal some fixed percentage of premiums, less any annuity withdrawals, in the future if you stay in the contract and the account does not decrease to a value of zero.

If your variable annuity is worth less than the minimum guaranteed amount at that date, the insurance company will add the difference.

Example Of An Annuity

A life insurance policy is an example of a fixed annuity in which an individual pays a fixed amount each month for a pre-determined time period and receives a fixed income stream during their retirement years.

An example of an immediate annuity is when an individual pays a single premium, say $200,000, to an insurance company and receives monthly payments, say $5,000, for a fixed time period afterward. The payout amount for immediate annuities depends on market conditions and interest rates.

Annuities can be a beneficial part of a retirement plan, but annuities are complex financial vehicles. Because of their complexity, many employers don’t offer them as part of an employee’s retirement portfolio.

However, the passage of the Setting Every Community Up for Retirement Enhancement Act, signed into law by President Donald Trump in late December 2019, loosens the rules on how employers can select annuity providers and include annuity options within 401 or 403 investment plans. The easement of these rules may trigger more annuity options open to qualified employees in the near future.

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The Top 5 Annuity Questions You Should Know How To Answer Them

In todays environment of financial uncertainty, having some form of guaranteed retirement income is especially appealing. For starters, you dont have to worry about the stock market fluctuation or outliving…

In today’s environment of financial uncertainty, having some form of guaranteed retirement income is especially appealing. For starters, you don’t have to worry about the stock market fluctuation or outliving your savings the latter being a top concern when it comes to retirement. What’s more, knowing that you’ll have a guaranteed lifetime income gives your peace of mind and can make it easier to set a budget.

Due – Due

Moreover, you may also be receiving some regular income from Social Security, but it may not be enough to cover all your expenses. And, an annuity is a good option to boost your retirement savings if you aren’t fortunate enough to have a pension which only around 21% of employees have.

However, despite these benefits, annuities can be challenging and complex. There are, after all, several types of annuities that have different fees and nuances as well as varying purposes. As such, an annuity might not be worth the investment if you don’t do your due diligence in advance.

With that in mind, here are five questions you have the answer to before committing to an annuity.

Fixed Annuities: The Lower

Variable Annuities – GREAT EXPLANATION!

Fixed annuities are the simplest type of annuity to understand. The insurance company gives you a guaranteed fixed interest rate on your investment when you agree to a length of your guarantee period. That interest rate could last anywhere between a year and the full-length of your guarantee period.

When your contract is over, you can either annuitize your contract, renew your contract, or transfer your money into another annuity contract or retirement account.

Because fixed annuities are based off the guaranteed interest rate and your income is not impacted by market volatility, you will know exactly how much your monthly payments will be but it also won’t benefit from a potential upswing in the market, so it may not keep pace with inflation. Fixed annuities are better used for growing income in the accumulation phase, not for generating income in retirement.

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How Do Variable Annuities Work

Variable annuities are a popular long-term investment plan for retirement. These deferred annuities earn returns based on the performance of the underlying investments , also known as a subaccount.

Annuities are not insured by the FDIC or any federal government agency but are backed by the claims-paying ability of the issuing life insurance company. Luckily, every annuity company has a State Guaranty Association to back the provider in case of insolvency.

Single Premium Vs Flexible Premium Annuities

A single premium annuity is an annuity funded by a single payment. The payment might be invested for growth for a long period of timea single premium deferred annuityor invested for a short time, after which payout beginsa single premium immediate annuity. Single premium annuities are often funded by rollovers or from the sale of an appreciated asset.

A flexible premium annuity is an annuity that is intended to be funded by a series of payments. Flexible premium annuities are only deferred annuities that is, they are designed to have a significant period of payments into the annuity plus investment growth before any money is withdrawn from them.

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Find A Personal Annuity That Fits Your Needs

Compare your options for a personal annuity.

Think about how much risk you want to take and when you need the money.

What is it?

Way to save on taxes while putting money away for retirement

Fixed

Way to save on taxes while putting money away for retirement

Best if you want
Fixed interest rate for a set period
How to fund it Single sum or Invest over time Single sum or Invest over time
Minimum
  • Income for set period or life
  • Payments to survivor
  • Income for set period or life
  • Payments to survivor

What Is An Annuity And How Can It Help Me In Retirement

The High Cost of Variable Annuities

If you’re not familiar with annuities, then this is hands-down the first question to ask. And, here’s what I believe is the easiest answer.

Annuities are simply contracts between investors and insurers. You give an insurance company money, either as a lump-sum payment or as installments over a period of time. In exchange, the insurance company invests the funds so that you’ll receive a guaranteed series of payments.

In contrast to other insurance contracts, payments aren’t contingent upon an unfortunate event or accident occurring. The customer decides how they will receive their payouts rather than filing a claim.

No matter if you have a retirement plan or not, there are a lot of issues you need to consider. Again, perhaps the biggest concern of retirees is running out of income in retirement. However, according to SimplyWise’s Retirement Confidence Index, the number one worry for retirees is that Social Security will not be available when they retire.

But, that isn’t all. Another concern is the unexpected death of a spouse, high medical costs, and investments that are not keeping up. And, although there is no one-size-fits-all solution, purchasing an annuity and pairing it with other retirement income sources can help address these retirement concerns.

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What Are The Common Types Of Annuities

Annuities are generally structured as either fixed or variable instruments. Fixed annuities provide regular periodic payments to the annuitant and are often used in retirement planning. Variable annuities allow the owner to receive larger future payments if investments of the annuity fund do well and smaller payments if its investments do poorly. This provides for less stable cash flow than a fixed annuity but allows the annuitant to reap the benefits of strong returns from their fund’s investments.

Which Type Of Annuity Is Right For You

The short answer to that question? It depends.

As a rule, annuities are regularly promoted as solutions to specific problems. This can include reducing social security taxes, staying in a lower tax bracket, or decreasing Medicare Part B premiums. And, despite being marketed to older individuals, younger people may find that annuities can help them prepare for retirement earlier than later.

But, ultimately when choosing the right type, it comes down to the following factors

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What Are Fixed Annuities

Just like your standard cheese pizza, fixed annuities are the easiest type to grasp. By agreeing to a guarantee period, the insurance company provides you with a guaranteed interest rate. Depending on your guarantee period, the interest rate could last from a year up to the full duration.

What happens if/when your annuity contract expires? You actually have several options. You can choose to convert your money into an annuity or transfer it into another annuity contract, such as another fixed annuity with a more favorable interest rate.

In this type, the main benefit is that it guarantees steady, tax-deferred earnings. Also, the rates are often higher than those offered by savings accounts and CDs, which typically offer lower returns.

The downside, however, is that growth may not be as robust as with fixed-index or variable annuities. And, theres that pesky surrender charge or IRS penalty if you made an early withdrawal.

When To Buy An Annuity

Understanding Annuities

The best time to buy depends on your personal income needs and sources of income.

For example, you may want more money early in your retirement to pay for travel or new hobbies. Or you may want more guaranteed income later in your retirement to pay for health care costs or accommodations.

If you want more money later you could consider waiting to buy an annuity, or buying a deferred annuity. This means that you pay for the annuity ahead of time but wont start receiving payments right away. Deferred life annuities provide higher regular payments than immediate life annuities. This is because you will receive fewer payments during your life.

If you buy an advanced life deferred annuity with money from your employer pension plan or your registered retirement savings, certain tax rules apply in terms of age and amount limits.

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Where Can You Buy Annuities

You can buy annuities from:

  • Insurance carriers such as New York Life
  • Annuity distributors, including large brokerage firms known as wirehouses, such as Merrill Lynch and Morgan Stanley
  • Independent broker-dealers like Raymond James
  • Large banks such as Bank of America
  • Mutual fund companies like Vanguard and Fidelity, which are considered some of the most competitive companies because they offer lower fees
  • Thousands of independent agents, brokers, and financial advisors across the country

Best Term Certain Annuity: Massmutual

MassMutual

MassMutuals RetireEase product stands out as the best term certain annuity. It combines no annual contract fees with a low minimum initial premium, and centuries-old financial stability.

  • Choose monthly, quarterly, semi-annual, or annual payments

  • Early withdrawal fees/surrender charges before year 10

  • Other small administrative fees

  • Small percentage of complaints about difficulty processing withdrawals

If youre looking for income for a specific period of time, consider MassMutuals RetireEase. The product scored highly in our review because of its flexible program design, no annual contract fees, low entry point, and stellar financial history.

Founded in 1851, MassMutual is a mutual insurance company, which means it is partially owned by its members. It has proven reliable and stable since its founding through wars, depressions, and recessions. AM Best rates it an A++.

MassMutual offers the following annuity products:

  • Deferred Fixed Annuity
  • Immediate Income Annuity
  • Deferred Income Annuity

The minimum initial investment starts at $10,000, with annual fees in the range of 1.67% to 2.77%, plus surrender charges in years one through nine. Current return rates range from 1.32% to 5.27%.

MassMutuals customer ratings online are quite high. The company manages over $3 billion in customer assets annually, so there are of course a few complaints to be found, but these are a very small proportion compared to the total customer base.

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Guaranteed Minimum Income Benefit

The Guaranteed Minimum Income Benefit guarantees a minimum lifetime income in retirement. The GMIB benefit is similar to a Deferred Income Annuity in that you invest money now and annuitize in the future. Typically the annuity owner must elect the guaranteed income benefit when you buy the annuity and must annuitize your contract at a future date to use the benefit similar to the two-tiered annuity.

Comparing Variable And Fixed Annuities

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Predictability and risk are the biggest differences between variable and fixed annuities.

Fixed annuities share similarities with bank certificates of deposit . You deposit a sum of money, and the insurer agrees to pay a certain interest rate over a specified period. Because of their predictable nature, fixed annuities are considered less risky than variable annuities.

Unlike variable annuities, money in a traditional fixed annuity grows at an interest rate set by the insurance company. It doesnt expose an investor to the stock market.

Fixed index annuities which track a broad market index like the S& P 500 offer some market exposure.

In contrast, a variable annuity functions more like a mutual fund. You invest in one or more subaccounts, which hold stocks, bonds, or a combination of both.

Variable annuities come with greater short-term volatility. Your money fluctuates with the broader markets, and your returns can vary.

Unlike a fixed annuity, variable annuities dont offer any guaranteed return on your principal investment. But some investors are willing to take on this risk for greater potential returns.

A variable annuity may be a good option if you have a longer time horizon and higher risk tolerance.

Keep in mind that variable annuities often come with higher expenses and fees than fixed annuities. Make sure you understand the limitations and penalties of any annuity before signing a contract.

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