Great American Insurance Group is committed to simplifying your path to financial security with annuities that are easier to understand and superior service every step of the way.
What does the perfect retirement look like to you? It might be relaxing on the beach, traveling the world, giving back to your community or simply spending time with family. The fact is, no matter how you plan to spend your retirement, you need a solid financial plan to get there.
An annuity might be one solution to help you achieve your goals.
What is an annuity?
Simply put, an annuity is a contract between you and an insurance company. It is designed to protect and grow your money, and then provide a stream of income during your retirement.
Here are some reasons you might want to consider purchasing an annuity:
- Protection and growth: You want to protect your money from loss while still having growth opportunity.
- Tax-deferral: You want to take advantage of tax-deferred growth.
- Retirement income: You want to turn the money you’ve saved into a regular paycheck for a specified number of years or for life.
- Death benefit: You’re looking for an efficient way to leave a legacy for your loved ones.
Types of Annuities
Understanding Annuities vs. CDs
Annuities and CDs are similar because they are both financial vehicles with guaranteed rates of return based on interest rates. While annuities and CDs are similar in some ways, an annuity is generally designed to meet long-term financial goals and has several advantages:
- Tax deferral
- The interest credited to an annuity is completely untouched by current federal income tax during the accumulation period. As a result of tax deferral, interest is compounded and the investment grows at a faster rate. The owner pays no taxes on this interest until he or she begins to receive income payments or makes a withdrawal. Earnings on CDs are generally taxable in the year the interest is earned.
- Annuities generally have provisions that allow the owner to withdraw some money penalty-free. Additionally, waivers may be available to allow owners with a terminal illness or extended care needs to withdraw all their money without penalty. CDs generally do not allow a similar level of liquidity.
- Guaranteed income stream
- Whether your client needs short-term, fixed period or lifetime payments, annuity settlement options can provide a guaranteed retirement income including options that can provide your client a stream of income for a fixed period or for a lifetime.
- Interest rate guarantees
- The interest rate an annuity earns will never fall below the minimum guaranteed interest rate, even if economic conditions cause interest rates to drop dramatically. The annuity contract, as a whole, will be credited with interest at an effective annual rate equal to or greater than that required by state law.
Here is a comparison of features of a typical fixed annuity and a typical CD:
|Tax-deferred growth||Earnings accumulate tax-deferred and are not taxable until they are withdrawn.||Earnings are taxable in the year the interest is earned, even if funds are not withdrawn.|
|Liquidity||Penalty-free withdrawals of a portion of the account value are typically available.||A penalty generally applies if funds are withdrawn prior to the CD’s maturity date.|
|Avoidance of probate||Upon death, the annuity’s death benefit is paid directly to the beneficiary(ies).||May be subject to probate.|
|Guaranteed lifetime income||Option is typically available.||Not available.|
|Loans||Available with many annuities.||Not available.|
|Extended care & terminal illness waivers||Waivers are typically available to allow withdrawal of all funds without penalty in certain situations.||Generally not available.|
The comparison assumes that the CD is not held in a tax-qualified account.
Annuity Investors Life offers competitive fixed annuities to help your clients meet their goals.
Products issued by Annuity Investors Life Insurance Company® (Cincinnati, Ohio). All guarantees based on the claims-paying ability of Annuity Investors Life®.
Unlike a CD, surrender charges may apply to an annuity. Withdrawals and distributions may be subject to income tax and, for some tax qualifications, may be restricted. If withdrawals or distributions are taken prior to age 59½, a 10% federal penalty tax may apply. Also, annuities are issued by insurance companies and are not FDIC insured, while CDs generally are issued by financial institutions and are FDIC insured.
This information is not intended or written to be used as legal or tax advice. Clients should seek advice on legal and tax questions from an independent attorney or tax advisor
Not FDIC or NCUSIF Insured • No Bank or Credit Union Guarantee • Not Insured by any Federal Government Agency • May Lose Value • Not a Deposit