ABOUT ANNUITIES
About $18 billion of annuities
are sold each month, yet these
popular retirement savings
vehicles are often
misunderstood.1 Here
are answers to some frequently
asked questions about annuities.
Q: What
exactly is an annuity?
A: An annuity is a
contract between you and an
insurance company. In exchange
for the money you pay to fund an
annuity, the insurance company
agrees to pay you an income in
the future. The amount will
depend on your investment, the
time period over which payments
are spread, and — for variable
annuities — the performance of
the underlying investments.
Q: Who
can benefit from an annuity?
A: Although annuities
are not appropriate for
everyone, they may provide a
number of financial benefits,
such as generating income,
managing taxes, and diversifying
assets.
Q: How
do variable annuities differ
from fixed annuities?
A: Using a variable
annuity, you can invest in a
variety of investment options
(called subaccounts), including
stocks, bonds, fixed interest and money market
portfolios. Variable annuity subaccounts fluctuate with
changes in market conditions.
When the annuity is surrendered,
the principal may be worth more
or less than the original amount
invested. Fixed annuities, on
the other hand, guarantee a
fixed rate of return. The
guarantees of fixed annuity
contracts are contingent on the
claims-paying ability of the
issuing insurance company.
Variable annuities are sold only
by prospectus. Please consider
the investment objectives,
risks, charges, and expenses
carefully before investing. The
prospectus, which contains this
and other information about the
investment company, can be
obtained from your financial
professional. Be sure to read
the prospectus carefully before
deciding whether to invest.
Q: Are
there penalties if I take funds
out of an annuity before I
retire?
A:
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 you
surrender the contract before
age 59½, it may be subject to a
10 percent federal income tax
penalty
