Unique Advantages of Annuities

When markets are volatile, people may look for stability. When markets are hot, people may seek growth potential. Annuities may help answer both strategies.

During 2002, people poured about $168 billion into individual annuities — an increase of 19 percent over the prior year.¹

An annuity is basically a contract with an insurance company. In exchange for your payments — made over time or in a lump sum — the insurance company agrees to pay you future income for a set number of years in retirement. Annuities have some very attractive features.²

Tax-Deferred Accumulation
Annuities offer tax-deferred accumulation, much like qualified retirement plans. However, there are no federally mandated contribution limits with annuities (though there may be insurance company limits). That means you can set aside as much as you wish — without worrying about exceeding federal tax limits.

Flexibility
Annuities can offer fixed or variable return.

Fixed annuities offer a guaranteed return, provided the money remains in the annuity for the duration of the contract. Your rate may be adjusted, but it will never fall below a guaranteed minimum rate specified in your annuity contract.

With a variable annuity, your premiums will be divided, at your direction, among a variety of investment subaccounts, which can range from conservative to very aggressive. Your return is based on the performance of the subaccounts you select.³ With variable annuities, you decide how much risk you want to take in order to earn potentially higher returns, and you also bear the corresponding investment risk.⁴

Security
Annuities offer a fixed-income payout option, which would provide an income that cannot be outlived. The contract owner can arrange to have the annuity paid over his or her lifetime or over the joint lives of the owner and his or her beneficiary.

Is an annuity appropriate for you? A financial professional may be able to help you answer that question. But if you're looking for a way to combine the potential for tax-deferred accumulation with flexibility and security, an annuity could be the answer you're looking for.

1) Life Insurers Fact Book 2003, American Council of Life Insurers
2) Annuity withdrawals are generally taxed as ordinary income and may be subject to surrender charges plus a 10 percent federal income tax penalty if made prior to age 59½. Surrender charges may also apply during the early years of the contract. The guarantees of annuity contracts are contingent on the claims-paying ability of the issuing insurance company.
3) Investments offering the potential for higher rates of return also involve a higher level of risk of principal.
4) Generally, variable annuities contain mortality and expense charges, account fees, underlying investment management fees, and administrative fees. Variable annuity subaccounts fluctuate with changes in market conditions and, when surrendered, the principal may be worth more or less than the original amount invested. Variable annuities are long-term investment vehicles designed for retirement purposes. They are sold only by prospectus, which contains more complete information on expenses and risk factors. Be sure to read the prospectus carefully before deciding whether to invest.

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