Frequent Annuity Questions

What is an annuity?

Look at it as an insurance contract designed to provide retirement income. The actual definition of the term “annuity” is a stream of payments that is guaranteed (by the issuing company) for a period of time.

How long can an annuity last?

It depends on how it is defined in the contract. It can be one of three ways:

1) for a set number of years

2) until the annuitant reaches a certain age

3) for the life of the annuitant

What are the two phases of a Deferred Annuity?

Phase 1. This is the period of time where you make contributions into the account. Often referred to as the saving or accumulation phase, this is where money goes in.

Phase 2. This is the period of time when you receive money from the account. Often referred to as the income or distribution phase, this is where money comes out.

Note: The length of time between the two phases varies and is defined in the annuity contract that you sign.

What Is a Variable Annuity?

It is a tax-deferred retirement vehicle that allows you to choose from a selection of investments, and then pays you a level of income. The income is determined by your accounts investment performance.

A Variable Annuity can be either immediate or deferred.

A Variable Annuity offers a range of investment options. The value of your investment is dependent upon the performance of the investment options you choose. They are typically mutual funds that invest in stocks, bonds, money market instruments, or some combination of these.

Variable Annuities are tax-deferred. That means you pay no taxes on the income and investment gains from your annuity until you withdraw your money. Make sure to consult with a tax advisor if you are considering this.

You may also transfer your money from one Variable Annuity investment option to another without paying tax at the time of the transfer.

What is a “free look” period for annuity contracts?

Typically, Variable Annuity contracts have a “free look” period of ten or more days. During this period, you have the ability to cancel/terminate the contract without paying surrender charges. If you cancel, you will receive a refund for the amount you paid.

This allows you time to continue to ask questions to ensure that a Variable Annuity is the right choice for your situation.

What is a surrender charge?

A surrender charge is a type of sales charge that applies if you withdraw money from an annuity within a certain period of time, usually six to ten years. This period of time is referred to as the surrender period. The surrender charge will decline over a period of years until it no longer applies.

What is a Life Annuity?

This is a type of annuity that pays for the remainder of a person’s lifetime.