Why invest in Annuities? It's all about Security!


Because there are different seasons in life, your Risk Tolerance may change over time. In your younger years when you build your wealth you may be willing to take higher risk for the potential of higher gains. As you grow older, your priority may shift to protecting what you have already gained. This is always an individual choice, only you can decide what your Risk Tolerance should be for sure. We can help you assess this.

Fixed Annuities provide an alternative to stock-based (Securities) products, since it is essentially a contract it is not subject to the same risks as the stock market. The principal is always protected. Fixed Indexed Annuities have been very popular in recent years because they share a percentage of gain of the market, but if the market drops you are guaranteed never to lose the gains you have made. In addition, some Annuities can be turned into a Life-time Income. This creates a cash stream in later years when you need it the most.

Basic Information About Annuities

An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. Annuities typically offer tax-deferred earning and may include a death benefit that will pay your beneficiary a guaranteed* minimum amount, such as your total purchase payments. Money from an your tax deferred savings plan can be transferred into an Annuity IRA without penalty.

Unlike retirement plans, there is no limit to how much money you can put into an annuity! The number of annuity products on the market today can make selecting the most suitable annuity a confusing process. In fact, there are essentially three types of annuities.

  • Timing of payout – immediate or deferred: In an immediate annuity, the the annuitant begins receiving payments immediately after purchase. This is for individuals who need immediate income from their annuity. In a deferred annuity, payments begin at some future date, usually at retirement.
  • Investments by Insurers – fixed or variable: Insurance companies invest annuity assets in government securities and high-grade corporate bonds. They offer a guaranteed* rate, typically over a period of one to ten years. Variable annuities provide you more control over where your premium goes, such as securities portfolios, fixed interest accounts, and money market securities.
  • Liquidity options – An annuity may allow you to withdraw either your interest earnings or up to 15% per year without a penalty (although any withdrawal from an annuity may be subject to taxes and a 10% federal penalty if taken before age 59 1/2).

Types of annuities

  • Fixed annuity: The insurance company guarantees that you will earn a minimum rate of interest during the accumulation phase of the annuity. Plus, it guarantees that the periodic payments will be a set amount. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse.
  • Equity-indexed annuity is a "hybrid" type of annuity. During the accumulation period – when you make either a lump sum payment or a series of payments – the insurance company credits you with a return that is based on changes in an equity index, such as the S&P 500 Composite Stock Price Index. (An annuity’s index account does not credit the same return or a percentage of the return of any index. Dow Jones indices do not include the dividend income of the company stocks that comprise it.) The insurance company typically guarantees a minimum return. After the accumulation period, the insurance company will make periodic payments to you under the terms of your contract, unless you choose to receive a lump sum.

Variable annuities are securities regulated by the SEC. Fixed annuities are not securities and are not regulated by the SEC. Equity-indexed annuities combine features of traditional insurance products (guaranteed minimum return) and traditional securities (opportunity for earnings potential of interest, based on the performance of an index). Depending on the mix of features, an equity-indexed annuity may or may not be a security. The typical equity-indexed annuity is not registered with the SEC.

Important Considerations

Anyone thinking about purchasing an annuity should carefully consider the following:

  • The rating of the insurance company (indicating their financial strength) issuing the annuity, particularly in the case of a fixed annuity.
  • Understand the fees paid to the brokers that market the annuities on behalf of the insurance company.
  • Any withdrawal from an annuity may be subject to taxes and a 10% federal penalty if taken prior to 59 1/2 years of age

For additional information about annuities you can visit http://www.sec.gov/answers/annuity.htm  (If you cannot access this information online, contact us to request a copy.)

* Annuity guarantees rely on the financial stability and claims paying ability of the issuing insurance company.