Tax-advantaged retirement income options

What Are Fixed Annuities?

A fixed annuity is a vehicle that can provide tax deferral, withdrawal benefits¹, guaranteed income streams for life² and safety of principal². These unique benefits can assist you in accumulating and distributing your assets to meet your needs. A fixed annuity can be an immediate annuity, providing for your current income needs, or it can be a deferred annuity, providing for your accumulation as well as future income needs. Your value in an annuity contract is the premium or premiums you've paid, less any applicable charges and fees plus interest credited. The insurance company credits interest, and you defer taxes on the earnings until you make a withdrawal or begin receiving an annuity income.¹

Lower Your Current Income Taxes

Tax-deferred earnings accumulate within the annuity to increase your investment:

• Interest is earned on the premiums.
• Interest is earned on the accumulated balance.
• Interest is earned on the dollars that would have been paid out in taxes every year (assuming you would have invested in a taxable account).

Tax-Advantaged Investment

Think of an annuity as your own personal retirement account, one that allows you to save for retirement, or during your retirement years, in a tax-advantaged way. You may already have a qualified plan through your employer, or an Individual Retirement Account (IRA). If you do, congratulations! These plans are among the few tax-favored accounts you can use to accumulate retirement funds. You may also have financial institution CDs, and other accounts that are earmarked for use during retirement. Fixed annuities are among the assets that can provide the foundation for your financial well-being.

While with a tax-deferred growth annuity the dollars that would have been paid out in taxes earn interest, the actual value versus that of a taxed account will vary depending on the nature of the investment. Lower maximum tax rates on capital gains and dividends could make the return for the taxable investment shown in the "Value of Tax-Deferred Growth" chart more favorable, thereby reducing the difference in performance between the accounts shown.

As an investor, you should consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. Because of potential changes in tax laws, you also should consult with a tax professional on these matters.

Benefits of Fixed Annuities

Some of the benefits you receive from fixed annuities include:

Safety of Principal²
Fixed annuities typically guarantee your principal.

Liquidity³
Annuities generally have several liquidity options that are unique and available without a penalty. Various options may have costs or fees associated with them. Be sure to review the contract or prospectus to determine any expenses related to options. These options are a 10% free withdrawal⁴, systematic withdrawal, and annuitization. Some annuities also offer a nursing home waiver: In the event that you should enter a licensed care facility, a percentage of your account value may be available to you without a surrender charge.⁵

Tax Advantages
The growth of your annuity is tax deferred until you decide to withdraw your money.

Yield
Because your contract is credited interest on the deferred tax portion of the investment, savings could grow faster than they would in a taxable investment. However, the ultimate tax savings will depend on when taxes are paid and the current rate in effect when they are paid.

Estate Benefits
Annuity proceeds are paid to named beneficiaries immediately upon death, without the delay, publicity or expense of probate. Proceeds received by the beneficiary are subject to income taxes, so you should carefully consider your estate plan or consult with your investment executive.

¹ There is a surrender charge imposed generally during the first 3 to 10 years that you own the contract. Withdrawals prior to age 59 1/2 may result in a 10% penalty in addition to any ordinary income tax.
² The guarantee of the annuity is based on the financial strength and claims-paying ability of the underlying insurance company.
³ Annuities should not be purchased as a short-term investment.
⁴ Varies depending on specific policy provisions.
⁵ Not all states recognize this waiver.

THINK OF AN ANNUITY AS YOUR OWN PERSONAL RETIREMENT ACCOUNT - ONE THAT CAN ALLOW YOU TO SAVE AND RETIRE MORE COMFORTABLY.

Types of Annuity Plans

Fixed Rate Deferred Annuities
The rate of interest for fixed rate annuities is guaranteed for a specified time. Fixed rate annuities are attractive because they often credit a higher interest rate than most fixed income alternatives. They are well suited for conservative investors who don't need current income and who want to save for the long term. Earnings accumulate tax-deferred, giving fixed rate annuities an advantage over other taxable savings plans. Some fixed annuities will offer a first-year bonus. These may also be referred to as "Rate for Term Annuities."

Equity Indexed Annuities
Equity indexed annuities offer the potential for market-linked returns, with a guarantee of principal⁶ after completing a surrender charge period. Its returns are linked to a stock market index. If the market does not perform well, equity indexed annuities have minimum rate guarantees subject to caps and participation rates. This attractive combination may make equity indexed annuities an excellent choice as a portion of a retirement nest egg.

Index annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. As an investor you are cautioned to carefully review an index annuity for its features, costs, risks, and how the variables are calculated.

Immediate Annuities
With immediate annuities you can deposit a lump sum, then start receiving income payments for a specific period or throughout your lifetime. Payments typically start a month or up to a year after the annuity purchase.

⁶ The guarantee of the annuity is based on the financial strength and claims-paying ability of the underlying insurance company.

With a fixed annuity, you accumulate money through the years to provide a future income.

Life annuity with period-certain option. Benefits are payable for the life of the annuitant, but if the annuitant dies before a designated time – typically five, 10, 15 or 20 years – benefits are paid to a named beneficiary for the balance of the designated time.

Joint and survivor option. Payments are made over the life of the annuitant and a survivor, typically a spouse. All benefits stop after the survivor dies.

Single life option. With this annuitization (income) option, payments continue for the life of the annuitant.

Period-certain option. Payments are made to a beneficiary for a specified number of years.

Income for as long as you live. Annuities offer the unique advantage of providing multiple income options that may be designed in a way that will last throughout your life.

Note: As indicated in footnotes, a surrender charge is generally imposed during the first three to 10 years that you own a policy. Withdrawals prior to age 59 1/2 may result in a 10% penalty, in addition to any ordinary income tax. The guarantee of the annuity is based on the financial strength and claims-paying ability of the underlying insurance carrier. Annuities should not be purchased as a short-term investment.

To learn more about fixed annuities, contact your investment executive.