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Annuity Living Benefits
Many variable annuity contracts offer “living benefit”
guarantees. For an additional cost, these living benefits can help protect
variable annuity owners from market volatility or running out of money in
retirement.
Adding a guaranteed minimum withdrawal benefit
to a variable annuity contract would allow the contract owner to withdraw a
fixed percentage (usually 5% to 7%) of the premiums paid until 100% of the
premiums paid had been withdrawn, even if the contract’s underlying
investments were to lose money.
A guaranteed minimum income benefit
would ensure that when the contract owner is ready to collect retirement
income payments, they would be based on a minimum payout base even if poor
market performance lowers the value of the underlying investments.
A guaranteed minimum accumulation benefit
would ensure that the contract value will not fall below a specified minimum
after a specified term. The minimum is usually equal to the premiums paid.
A variable annuity is a long-term financial vehicle used for
retirement purposes. With a variable annuity contract, one or more payments
are made to an insurance company, which agrees to pay an income stream or a
lump-sum amount at a later date. Variable annuities have contract
limitations, fees, and charges, which can include mortality and expense risk
charges, sales and surrender charges, administrative fees, and charges for
optional benefits. Withdrawals reduce contract benefits and values. Variable
annuities are not guaranteed by the FDIC or any other government agency, nor
are they guaranteed or endorsed by any bank or savings association.
Withdrawals of annuity earnings are taxed as ordinary income
and may be subject to a 10% federal income tax penalty if made prior to age
59˝. Surrender charges may also apply during the contract’s early years. Any
guarantees are contingent on the claims-paying ability of the issuing
company. Variable annuity subaccounts fluctuate with changes in market
conditions. When an annuity is surrendered, the principal may be worth more
or less than the original amount invested.
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.
© 2007 Emerald Publications
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