Annuity Education Guide.
Solving for today’s retirement savings and income needs with annuities.
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Knowledge is Power
for your retirement
When it comes to planning and preparing for retirement, the desire for protection has never been greater.
of investors surveyed say it is important that their retirement income plan is designed to provide a guaranteed income payment or principal protection
That’s why more and more individuals are turning to annuities. Perhaps you’re one of them? You’ve done your research. You’re looking for a better retirement outcome and you like the idea of growth potential combined with the opportunity for protected lifetime income when you’re ready to retire. You believe an annuity is a good choice for your retirement strategy. But where do you go from here? While there are several different types of annuities to choose from—and they can appear complex at first glance—your financial professional can help you determine the best annuity fit for you.
Let’s dive into the world of annuities.
According to a recently released study:
91%
*Alliance for Lifetime Income, Protected Retirement Income and Planning Study, June 2021
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Introduction What is an annuity? How does an annuity work? What are income benefits? Which annuity makes sense for me? My priority is... Consider a Fixed Annuity Consider an Index Annuity Consider a Variable Annuity Consider an Income Annuity Annuities at-a-glance Next steps...
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What is an annuity?
Annuities are long-term products designed for retirement. In the growth stage, they can help you build assets on a tax-deferred basis. In the income stage, they can provide you with guaranteed income through standard or optional features. Depending on the type, an annuity can help meet your needs for growth, downside protection, and protected lifetime income.
There are basically four different types of annuities to consider:
1 If you fund your IRA with an annuity, you should realize that these types of retirement accounts are already tax-deferred. An annuity provides no additional tax-deferred benefit beyond that provided by the retirement account itself. You should only use an annuity in a retirement account if you want to benefit from features other than tax deferral. Please consult with your financial professional and tax advisor regarding your individual situation.
• Fixed
• Index
• Variable
• Income
(Immediate & Deferred)
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Annuity guarantees are backed by the claims-paying ability of the issuing insurance company. There is no guarantee that income from annuities will keep pace with inflation.
2 Index annuities are not a direct investment in the stock market. They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company. They provide the potential for interest to be credited based in part on the performance of the specified index, and the principal may be protected from market downturns or fluctuations. Index annuities may not appropriate for all clients.
3 An investment in a variable annuity is subject to risk, including possible loss of principal. The contract, when redeemed, may be worth more or less than the original investment.
4 Income annuities permanently covert principal into a guaranteed income stream.
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You purchase an annuity from a life insurance company with an initial sum of money...
You can convert your annuity into guaranteed income when you retire...
Your money can grow tax-deferred until you withdraw it...
5 Ask your financial professional for complete details about the annuity you may be considering, including the ability to add money to the annuity after purchase and any associated limitations. 6 Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply. 7 Income benefits may be standard or optional and an additional fee generally applies. 8 May offer a fixed return or principal protection. 9 Early withdrawals may be subject to withdrawal charges and a Market Value Adjustment (MVA) may also apply to certain fixed annuities and index annuities. Partial withdrawals may reduce benefits available under the contract, as well as the amount available upon a full surrender.
Opportunity for protected lifetime income with a choice of income guarantees
May offer downside protection
May include family protection with a guaranteed death benefit
Potential access to your money depending on the type of annuity you choose
Certain types of annuities offer you the flexibility to receive guaranteed lifetime income while also maintaining access to your money through optional income benefits.
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Depending on the type of annuity you purchase, you may be able to add money to your annuity after you first purchase it.
Income payments can continue for a specified period of time—or you can choose an option for payments for as long as you live.
Additional benefits of an annuity:
Step 1
Step 2
Step 3
How does an annuity work?
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Income benefits, such as Guaranteed Lifetime Withdrawal Benefits and Guaranteed Living Benefit Riders...
These benefits may be standard or optional depending on the annuity you choose to purchase...
If the annuity you choose offers an income benefit...
It’s important to know that with a Guaranteed Lifetime Withdrawal Benefit or Guaranteed Living Benefit Rider...
Keep in mind, if you annuitize an annuity contract...
Your financial professional...
are features of an annuity that are designed to help you grow your retirement income and generate protected lifetime income for you—or for you and your spouse.
you will no longer be able to take withdrawals of contract value and all other features and benefits of the contract will terminate, including the contract's death benefit and your ability to surrender the contract.
can help you evaluate the different types of income benefits that are available with today’s annuities.
additional fees, age restrictions, withdrawal parameters, and other limitations may apply. With variable annuities, certain investment requirements may also apply.
you will need to take withdrawals within certain parameters to realize the feature’s benefits. If you take withdrawals that exceed the parameters, it can have an adverse impact on your future income.
As an alternative to a Guaranteed Lifetime Withdrawal Benefit or Guaranteed Living Benefit Rider, an annuity contract can be annuitized in order to receive lifetime income payments for no additional cost if a lifetime annuity option is chosen.
What are income benefits?
Guarantees are backed by the claims-paying ability of the issuing insurance company.
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10 Excess withdrawals may be reduce the Income Base and the amount available for future lifetime income withdrawals. Be sure to ask your financial professional for complete details about the annuity and income benefit you may be considering.
How much risk am I willing to take?
What’s most important for me to protect? My principal? My income? Or my legacy?
No two people heading into retirement have the same set of needs, preferences, or goals. That’s why there are different types of annuities from which to choose. To help determine the annuity that may make sense for you, review what is important to you as you plan for your retirement. Then work with your financial professional to establish your long-term savings and income priorities and choose the annuity that can help meet your goals.
Is it important for me to retain access to my money should I need it?
Which annuity makes sense for me?
Before you begin to consider your priorities, you’ll want to think about these important questions.
My priority is...
(After you have had an opportunity to review the descriptions associated with each priority, check the box below that best matches your retirement savings priority)
Guaranteed interest earnings
Protection from possible market downturns
Access to my money if I need it
Opportunity to receive protected lifetime income for as long as I live when I retire
To conservatively grow my retirement savings with:
To achieve greater growth potential for my retirement savings with:
Interest that’s based, in part, on the performance of a market index
Professionally managed investment portfolios—with the associated market ups and downs
To participate in the upside growth potential of the market with:
To maximize my retirement income by:
Permanently converting my principal into a series of immediate or deferred annuity income payments—with the understanding that I would no longer have access to my principal
Consider a Fixed Annuity
A FIXED ANNUITY is designed for people who are looking to save money with a guaranteed fixed rate of return for a specific period of time, protection from market risk and the option for protected lifetime income in retirement.
A Fixed Annuity provides a fixed interest rate for a specific period of time, offering a high level of predictability, along with flexible payment choices including the option for lifetime income.
How it works
Guarantees are backed by the claims-paying ability of the issuing insurance company. * Earnings or interest can grow tax-deferred. Earnings or interest is taxable as income at the time of withdrawal. Withdrawals taken prior to age 59½ may be subject to an additional 10% federal tax. 11 At the end of the specified time period, a new interest rate will be set and it may be higher or lower than the previous rate.
Features
Considerations
Rate of interest is guaranteed for a specific period of time
There may be withdrawal charges and an additional federal tax for early withdrawals*
Protection from market downturns
A choice of payment options, including protected lifetime income for as long as you live
You don’t have to pay taxes on any interest earned until money is withdrawn*
Access to your funds at any time, possibly subject to charges
May include a Guaranteed Lifetime Withdrawal Benefit for a fee to help grow future income
Risk Tolerance: Low
Return to Priority Checklist:
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Consider an Index Annuity
An INDEX ANNUITY is designed for people who are looking for upside growth potential (based in part on the performance of a market index), principal protection from market downturns, and the option for protected lifetime income in retirement.
With an Index Annuity, the interest you receive is linked, in part, to the performance of a market index, such as the Standard & Poor’s 500 Index. When the index increases, you’ll receive interest—based on what’s specified in your annuity contract. If the index declines, you won’t receive interest, but the principal of your annuity will not be affected.
Protection from market downturns since the value of the annuity is not affected by negative index returns.
May include a standard or optional Guaranteed Living Benefit (GLB) Rider for an additional fee to help grow future income
Death benefit features are available
The potential to grow based in part on the performance of a market index
In a down market, your annuity may not earn interest
Guarantees are backed by the claims-paying ability of the issuing insurance company. * Earnings or interest can grow tax-deferred. Earnings or interest is taxable as income at the time of withdrawal. Withdrawals taken prior to age 59½ may be subject to an additional 10% federal tax.
Risk Tolerance: Low to Moderate
Consider a Variable Annuity
A VARIABLE ANNUITY is designed for people who are looking for even greater growth potential with market participation through professionally managed investment portfolios and the option for protected lifetime income in retirement.
With a Variable Annuity, your rate of return is tied to professionally managed investment portfolios (variable investment options) that may include stocks, bonds or a combination of investments. The value of your annuity can move up or down depending on the performance of the underlying investment portfolios selected. With a variable annuity, you can benefit when the investments go up, but lose money if they go down. You can, however, purchase features that help protect your income if the market goes down.
Professional money management with a choice of investment options
You don’t have to pay taxes on any interest or earnings until money is withdrawn*
Optional Guaranteed Lifetime Withdrawal Benefit (GLWB) features may be available for an additional fee to help grow future income—no matter how the market performs
Standard or enhanced death benefit features may be available
Potential to benefit from market advances
You could lose some or all of your principal
Guarantees are backed by the claims-paying ability of the issuing insurance company. * Earnings or interest can grow tax-deferred. Earnings or interest is taxable as income at the time of withdrawal. Withdrawals taken prior to age 59½ may be subject to an additional 10% federal tax. 12 Investment requirements may apply with variable annuity Guaranteed Lifetime Withdrawal Benefits.
Risk Tolerance: Moderate to High
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Additional fees generally apply for optional features, such as income benefits or enhanced death benefits
Consider an Income Annuity—
such as an Immediate Annuity or Deferred Income Annuity
With an Income Annuity, you can begin receiving income now or in the future. With an Immediate Annuity, it is typically required that income payments begin within 12 months of purchase. With a Deferred Income Annuity, income payments typically begin after 12 months, but no later than 30 years after purchase.
A choice of annuity payment options, including protected lifetime income for as long as you live
May provide options for payment increases
Income can begin immediately or be deferred to a later date
You no longer have access to your principal
An additional federal tax applies for early withdrawals*
Guarantees are backed by the claims-paying ability of the issuing insurance company. *Withdrawals taken prior to age 59½ may be subject to an additional 10% federal tax.
An INCOME ANNUITY is designed for people who are looking for a predictable level of guaranteed income now or in the future, during retirement. Income annuity purchasers are more interested in maximizing their income payments.
Choice of annuity income payment options
Guarantees are backed by the claims-paying ability of the issuing insurance company. * With immediate annuities and deferred income annuities, a portion of each annuity payment represents a non-taxable return of premium paid for the contract (i.e. return of principal). The balance of each payment is considered ordinary taxable income. Annuity payments from an annuity held within a tax-qualified retirement account comprised of pre-tax premium/contributions will generally be fully taxable. Payments that begin prior to age 59½ may be subject to an additional 10% federal tax.
Annuities at a glance
GLWB = Guaranteed Lifetime Withdrawal Benefit/Living Benefit Rider GLWBs are available at contract issue in select annuities. Additional fees, age restrictions, investment requirements and other limitations may apply. Please see prospectus or contract for more details.
(withdrawal charges may apply)
(withdrawal charges and MVA may apply)
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Clear chart
* Available through the income protection benefit. ** If the contract is annuitized, you may no longer access your contract value. *** Not a direct investment in a stock, mutual fund or security. Interest may be earned based in part on the performance of an underlying index.
Opportunity for index-based interest***
Ready to take the next step?
Your financial professional can help you further evaluate the different types of annuities that are available today to see if an annuity makes sense for a portion of your retirement portfolio.
Additional information about annuities Annuities are long-term products designed for retirement. In the growth stage, they can help you build assets on a tax-deferred basis. In the income stage, they can provide you with guaranteed income through standard or optional features. You can annuitize your contract and receive lifetime income payments for no additional cost if you choose a lifetime annuity option or you may choose an income protection benefit. Certain annuities offer guaranteed lifetime withdrawal benefits/guaranteed living benefit riders, which are standard or optional and subject to additional fees, age restrictions, withdrawal parameters and other limitations. With variable annuities, these types of benefits are optional and investment requirements also apply. Early withdrawals may be subject to withdrawal charges and a Market Value Adjustment (MVA) may also apply to certain fixed annuities and index annuities. Partial withdrawals may reduce benefits available under the contract, as well as the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply. Keep in mind, for retirement accounts (such as IRAs), an annuity provides no additional tax-deferred benefit beyond that provided by the retirement account itself. An investment in a variable annuity involves risk, including possible loss of principal. Index annuities are not a direct investment in the stock market. They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company. They provide the potential for interest to be credited based in part on the performance of the specified index, and the principal may be protected from market downturns or fluctuations. Index annuities may not appropriate for all clients.
Variable annuities are sold by prospectus only. The prospectus contains the investment objectives, risks, fees, charges, expenses and other information regarding the contract and underlying funds, which should be considered carefully before investing. Please contact your insurance-licensed financial professional or call 1-800-445-7862 to obtain a prospectus. Please read the prospectus carefully before investing.
All contract and optional benefit guarantees, including any fixed account crediting rates or annuity rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer from which this annuity is purchased. This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional. The purchase of an annuity is not required for, and is not a term of, the provision of any banking service or activity. Products and features may vary by state and may not be available in all states. Annuities issued by American General Life Insurance Company (AGL), Houston, TX. Certain annuities issued by The Variable Annuity Life Insurance Company (VALIC), Houston, TX, except in New York. AGL and VALIC do not issue annuities in New York. In New York, annuities issued by The United States Life Insurance Company in the City of New York (US Life). Variable annuities are distributed by AIG Capital Services, Inc. (ACS), Member FINRA, 21650 Oxnard Street, Suite 750, Woodland Hills, CA 91367-4997, 1-800-445-7862. AIG Life & Retirement is part of American International Group, Inc. (AIG). It includes Individual Retirement, Group Retirement, Life Insurance and Institutional Markets, as well as issuing companies AGL, VALIC and US Life. All are members of AIG. © 2021. American International Group, Inc. aig.com
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