Appetite for Income

Investors have poured $1.8 trillion into annuities, an amount nearly equal to the $2.1 trillion in 401(k) plans.¹

Annuities can be an attractive alternative to other retirement-savings vehicles. They offer a combination of insurance benefits and tax-deferred accumulation — with the option for guaranteed lifetime income payments — and can be used to help meet a number of financial needs. But choosing the appropriate type of annuity for your situation can be challenging.

Deferred or Immediate
A deferred annuity allows you to accumulate retirement savings on a tax-deferred basis. During the accumulation phase, you make set payments to the insurance company. During the annuitization phase, the insurer pays you regular income during retirement.

An immediate annuity is funded with a lump-sum payment, typically at retirement, and payout begins immediately. The size of your annuity "paycheck" will depend on the amount of your initial contract, the predetermined rate of return, and the number of years over which you will be paid.

Fixed or Variable
Fixed annuities guarantee a fixed rate of return during the life of the contract. Payouts can be structured to provide guaranteed income that will last throughout your own lifetime or over the lifetimes of both you and your spouse.

Variable annuities are long-term investment vehicles used for retirement savings. You can choose how to allocate your funds in the underlying investment subaccounts, the value of which will fluctuate based on changes in market conditions. When redeemed, a variable annuity may be worth more or less than the original investment amount.

Annuity earnings are taxed as ordinary income when withdrawn, and withdrawals may be subject to a 10 percent federal income tax penalty if made prior to age 59½. Surrender charges may also apply during the contract's early years. The guarantees of annuity contracts are contingent on the claims-paying ability of the issuing insurance company and do not apply to the performance of the underlying investment subaccounts.

Variable annuities are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses of the variable annuity and the underlying investment options 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.

Annuities can provide a systematic way to structure both retirement savings and distributions. Call today to discuss whether an annuity would be a valuable addition to your portfolio.

1) The Wall Street Journal, May 13, 2006

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