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Fixed
Annuity Factors
In a
recent survey, 83 percent of respondents said they purchased an annuity to
provide a financial cushion in case they lived beyond their life expectancy.
Other common reasons were to avoid becoming a burden on their children, to have
a source of retirement income, and to help pay for emergencies such as
catastrophic illness or nursing-home care.¹
These answers might make an
annuity seem like something you need to prepare for the worst. But an annuity
can also help contribute to a bright future.² Here are some positive features
that may help you decide whether a fixed annuity would be appropriate for your
portfolio.
Stable
Income
A fixed annuity is a contract between an individual and an
insurance company. In exchange for contract payments, the insurance company will
pay a guaranteed income to the annuity owner.³ The amount of income depends on
the contract interest rate, the amount of time before distributions begin, and
other factors.
Flexibility
Nearly every aspect of a fixed annuity can be tailored to meet
the needs of the owner. Distributions can be a lump sum or a series of payments
that may begin immediately or in the future, depending on the owner's age. These
payments can last for a specific period, the life of the owner, or one of
several other intervals.
Potential
Tax Benefits
Nonqualified annuity premiums typically are not tax deductible, but any earnings
grow tax deferred, and ordinary income taxes are due only upon withdrawal.
Because there are no legally mandated distributions from an annuity, the money
can be left to accumulate tax deferred until it is needed.
Having enough money to last
throughout retirement is something many people worry about. Call today to learn
whether a fixed annuity may help you prepare for unexpected expenses and help
ensure that you don't run out of money.
1) Annuity Fact Book,
National Association for Variable Annuities, 2002
2) Most annuities have surrender charges that are assessed during the early
years of the contract if the contract owner surrenders the annuity. In addition,
if the contract is surrendered before age 59½, there may be a 10 percent
federal income tax penalty.
3) The guarantees of fixed annuity contracts are contingent on the claims-paying
ability of the issuing insurance company.
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