Should I choose an immediate or deferred annuity?
Perhaps the first important consideration in buying an annuity is determining whether you need income right now or further down the road. If you have an urgent income need, then you should think about buying an immediate annuity, which offers you a steady stream of income immediately after purchase. If you can wait to draw upon annuity payments later (for example, as part of your retirement income), then a deferred annuity enables you to receive payments after an elapsed period of time—for example, five, seven, or 10 years after purchase. Look at your overall financial situation and current stage of life in making this decision.
Is there a minimum amount required to purchase a contract?
One important aspect to consider when buying an annuity is which type is right for you. Most annuities have minimum purchase payments and may or may not allow multiple payments. Keep in mind that some flexible premium annuities may offer payroll deduction, with minimum purchase payment requirements of $50 or less. Other annuities need a single lump sum with certain minimum requirements, depending on the product. Consider what works best for you and meets your financial needs before choosing.
How will my annuity be credited with earnings?
Different types of annuities offer you different protection and opportunities when it comes to earnings. Traditional fixed annuities offer you the protection of an interest rate that is fixed and guaranteed never to be below a minimum amount. Fixed-indexed annuities offer the protection of a fixed rate as well as the potential to earn a higher interest rate based on a referenced stock or bond market index, but with the guarantee that you will never have a negative interest rate. Variable annuities do not offer the principal protection, but allow you the opportunity for greater growth based on the performance of selected market portfolios.
Are the charges for an annuity?
Most annuities do not charge up front sales charges, but have charges if you withdraw money before the end of a stated period. Generally, fixed and fixed-indexed annuities do not have administrative fees, although interest crediting rates take into account expenses related to the product. Variable annuities may have ongoing maintenance and administrative fees to provide guaranteed death benefits and cover expenses related to the product. When purchasing a variable annuity, you can find specific information regarding contract charges in the contract's prospectus.
What if I need to access some of my money during the accumulation phase?
Annuities are long-term instruments designed to accumulate money for retirement and provide their best possible benefit if left intact, without taking withdrawals. However, it's nice to know that you have access to the funds in your annuity if you need them. Many of our products provide a number of options to withdraw the money in your annuity, including 10% penalty-free withdrawals and interest withdrawals through the easy systematic payment program. Remember that for certain products withdrawals prior to age 59½ may be subject to restrictions and a 10% tax penalty, according to IRS regulations. Also, early withdrawal charges and taxes may apply.
Are there any special features that will protect me if I get sick or need long-term care?
Yes, some of our annuities may include the following waivers to help ease the strain of unforeseen events:
- Extended Care Waiver – To help ease the strain of certain unforeseen events, an Extended Care Waiver may be available for no additional charge. If a contract owner is confined to a nursing home or other long-term care facility after the completion of the first contract year for at least 90 consecutive days, early withdrawal charges may be waived on withdrawals up to a full surrender.
- Terminal Illness Waiver – If more than one year after the contract effective date, a contract owner or joint owner receives from a physician a diagnosis of a terminal illness with a prognosis of 12 months or less, he or she may have the option with the Terminal Illness Waiver to withdraw up to 100% of the annuity's account value without incurring an early withdrawal charge. There is no additional charge for this waiver, but the withdrawal provision may be used only once over the duration of the contract.
What happens if I die before I begin to receive payments from my annuity?
In the unfortunate event of the death of the contract owner before income payments begin, the beneficiary may receive a death benefit from the annuity. In some contracts, the death benefit will be based on the account value while other contracts use the surrender value or other applicable contract value to calculate the death benefit. If your spouse is the surviving joint owner or sole beneficiary, then he or she may have the right to succeed to the ownership of the annuity with all rights and privileges of the original owner, as allowed by IRS regulations.