What is an annuity?
An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-term financial goals, under which you make a lump-sum payment or series of payments and the insurer agrees to make periodic payments to you beginning immediately or at some future date.
The four major benefits of ownership
- Principal protection
- Tax-deferred growth on earnings
- Death benefit
- Guaranteed income stream
Principal Protection – An annuity is an insurance contract, which means your principal cannot be lost due to market volatility1.
Tax-deferred growth – You don’t pay taxes on interest earned in the annuity until the money is withdrawn.
Death benefit – Upon death, a properly structured annuity would be paid to the beneficiary without going through probate court.
Guaranteed income stream – Many retirees use annuities to supplement their income because they offer a fixed monthly payment that can be guaranteed for a certain period of time or for life.
1Your principal is guaranteed not to be reduced because of a downturn in the applicable market index. However, withdrawals in excess of the Free withdrawal amount are subject to withdrawal Charges during the Withdrawal Charge period, and may result in a loss of principal.