A variable annuity is a long-term contract between you and your insurance company that combines investment and protection features into one financial product, designed to help provide you with retirement income.
Benefits of a variable annuity:
- Tax Deferral - Ability to grow your assets tax deferred
- Professional Management - Access to professional investment management
- Lifetime Income - Ability to create income that's predictable, sustainable and potentially increasing through optional benefits
- Protection - Help protect your retirement assets from potential market downturns
- Legacy - Death Benefit and Legacy options that allow you to determine how assets are distributed to your beneficiaries.
Purchases & Withdrawals
There are two types of variable annuities: qualified or nonqualified. If you purchased it through an IRA or qualified plan it will not provide any additional tax advantages (beyond that of the plan.) Nonqualified annuities avoid income tax fees until distributions are made.
Withdrawals come first from any contract gains and can reduce the death benefit, optional benefits, and contract value. Taxable distributions are subject to ordinary income tax and, if made prior to age 59 1/2, may also be subject to a 10% federal income tax penalty. Certain qualified retirement plans require distributions to begin by age 70 1/2.
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When considering an annuity for use in an IRA or other tax-qualified retirement plan, it is important to note that there is no additional tax-deferral benefit, since these plans are already afforded tax-deferred status. Thus, an annuity should only be purchased in an IRA or qualified plan if some of the other features of the annuity are of value, such as access to specific portfolio choices, the ability to have guaranteed payments for life and other guaranteed benefits, and you are willing to incur any additional costs associated with the annuity to receive such benefits. See the prospectus for details.
Products and features may not be available in all states.
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