How does tax deferral help my money grow faster?Annuity Agent Journal News - Updates
Fixed Annuity agent articles of FSD FINANCIAL SERVICES
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What is an annuity?
An annuity is a financial product offered by insurance companies. When you put your money in an annuity, the insurance company agrees to pay you interest during both the accumulation and payout phases of your contract. All of the interest you earn is tax deferred. Tax deferral helps your annuity grow even faster than a taxable product. How does tax deferral help my money grow faster? With tax deferral your annuity grows three ways. Your premium earns interest. Your interest earns interest. And the money you would have paid in taxes earns interest. No taxable financial product gives you that. How much will I earn on my annuity? A current competitive interest rate is set at issue and is guaranteed for the guarantee period you select—5, 6, or 8 years. At the end of the first guarantee period, you may choose to surrender your contract or to renew for the same or another guarantee period with an interest rate then in effect for that guarantee period. For your convenience, renewal at the end of the original period is automatic if no action is taken within 30 days.What happens when I need my money? You have several options. You can convert your annuity to a series of income payments. This is called annuitizing your contract. When you annuitize, you can choose from several options including ones that will guarantee an income for your lifetime. After the first year, you can annuitize your contract without a surrender charge or market value adjustment (MVA) if you select an option which spreads your income payments out over at least five years.* The MVA is an adjustment which allows the insurance company to pay higher interest rates than on similar products without MVAs. The amount of the MVA is determined by a mathematical formula using the difference between an external interest rate index at issue and at the time of withdrawal. The MVA can have a positive or negative impact on the accumulation value of your contract. Can I access my money without annuitizing’ Yes. After the first 30 days of your contract, you can withdraw the interest that has been credited to your annuity. You have the option of having the interest paid to you in a lump sum or systematically. If you withdraw more than the prior 12 months interest in one contract year, your withdrawal will be subject to a surrender charge and an MVA. Because interest is credited to your contract daily and compounded annually, withdrawing your interest will slightly reduce the amount of interest you earn each year.* What happens if I surrender my contract or withdraw more than the free withdrawal amount? If a withdrawal or full surrender exceeds the free withdrawal amount in any contract year, an MVA will be applied. After the MVA is applied, a surrender charge will be deducted from the full amount withdrawn. A surrender charge is charged by the insurance company when you cancel (or surrender) your annuity or withdraw more than the free withdrawal amount. The surrender charge will be 9% in the first year and will be reduced by 1°/h per year until the end of the guarantee period. Except in North Carolina, Texas, and Utah, new surrender charges will apply to each new guarantee period. In all states, the MVA will apply to each new guarantee period. Who gets my annuity if I die? It’s up to you. Most often, when you purchase an annuity you are the annuitant. The annuitant is the person whose death triggers the payment of a death benefit. The death benefit is the accumulation value of the annuity (no surrender charge or MVA). It can be paid directly to the beneficiaries you select. What about nursing home expenses? As the owner, you have access to the full accumulation value of your annuity (no surrender charge or MVA) if the annuitant becomes hospitalized or confined to an eligible nursing home. The hospitalization or confinement to the nursing home must begin after the contract effective date and must be for at least 30 consecutive days. Am I eligible to purchase this annuity? If this product is available in your state, you can purchase this annuity if you are between ages 0 and 90. How much do I have to put in to start an annuity? Can I add more money later? This annuity is a single premium annuity. Your one premium is limited to a minimum of $15,000 and a maximum of $500,000 without prior approval. *When you make withdrawals from or surrender your annuity you may be subject to federal income tax on the amount withdrawn. In addition, you may be subject to an IRS penalty tax if you make withdrawals or surrender your annuity before age 591/2. This Annuity contract may not be available in all states. In those states where it is available, provisions may vary or may not be available. State premium taxes may reduce the final value of your annuitm~ Prior to purchasing this contract, contact your representative or the company for complete contract provisions and details. Policies issued by USG Annuity & Life Conipany and Equitable Life Insurance Company of Iowa P.O. Box 617, Des Moines, IA 50303-06 17 Contract Forms: 1829-3/97, 1 829C-3/97 102508 |
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