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Today’s Retirement Realities
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Retirement Realities
Behavior Matters
Generating Reliable Income
Introduction
The odds of living longer
Impact of wealth on life expectancy
Plan for 100 years
Retirement worries
A look back at the stock market
When will you need the most retirement income?
How your spending may change in retirement
Invest for long-term growth potential
The importance of diversification and staying invested
A case of declining yields
The “4% Rule” has changed
The “4% rule” — then and now
Key retirement risks
Market performance can impact how long your savings may last
Market performance: Impact during savings years
Market performance: Impact once withdrawals begin
Will you outlive your retirement income?
Shifting sources of retirement income
Generating income from your savings and investments
Benefits of annuities for protected lifetime income
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Retirement may last longer than you think.
You may need to plan for a retirement that lasts 30 years or longer. What's more, the wealthier you are, the longer you may live.
Increasing longevity introduces new challenges.
Will you outlive your money? What is your greatest worry about a long retirement?
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The odds of living longer.
The reality is that you could end up living a lot longer than you may think
Probability of living to specified ages
Assuming a couple, both age 65, there is a • 50% chance that one spouse will live to age 93 • 25% chance that one spouse will live to age 97
Source: Society of Actuaries 2012 Individual Annuitant Mortality Tables (Age Nearest, with Scale G mortality improvement).
+ Show sources
Plan for a long retirement.
Consider the probabilities of a 65-year-old living well into his or her 90s — if not to age 100. • Nearly a 1 in 3 chance a 65-year-old female will live to 95. • 1 in 5 chance a 65-year-old male will live to 95. This could mean spending three or four decades retired and without a regular paycheck.
65-year-old female
65-year-old male
Age 90
Age 95
Age 100
53%
43%
31%
21%
6%
12%
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Impact of wealth on life expectancy.
Can wealth impact your longevity?
More wealth may equate to more years.
Research shows that the wealthier you are, the longer you may live — and the increase in additional years is actually greater for men than women, as shown here. For example, the wealthiest 10% of American men born in 1940 may live an average of 5.9 years longer than similar individuals born 20 years earlier in 1920.
Source: Josh Zumbrun, “The Richer You Are the Older You’ll Get,“ blogs/wsj.com, April 18, 2014. Data compiled by Barry Bosworth at the Brookings Institution using data from the University of Michigan’s Health and Retirement Study, a survey that tracks the health and work-life of 26,000 Americans as they age and retire.
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Women
Men
Change in average additional life expectancy in years at age 55, by income, between groups born in 1920 and 1940
Plan for 100 years.
Could you be a future member of the 100 club?
Embrace the new longevity.
The number of people who have reached their 100th birthday — so-called “centenarians” — is growing rapidly and projected to reach over 750,000 by 2045. What’s more, a recent AIG survey revealed that: • 53% of Americans say their goal is to live to age 100.
3
1. Alliance for Aging Research, “Celebrating Centenarians and Studying Longevity,” July 8, 2016. 2. U.S. Department of Health and Human Services and U.S. Department of Commerce, “Centenarians in the United States,” July 1999. National Center for Health Statistics, “Mortality Among Centenarians in the United States, 2000-2014.” 3. AIG 2019 Plan for 100 Survey.
The growing number of centenarians in the United States
1,2
1990
2000
2014
2045
37,000
50,000
72,000
757,000 (projected)
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Retirement worries.
Increasing longevity introduces new challenges
Will you outlive your money?
While increasing longevity is a reason to celebrate, it also introduces new challenges. • 35% of Americans surveyed say that serious health problems worry them the most with respect to living to 100. Being a burden on family and running out of money to live comfortably are also identified as top worries.
What are your top retirement worries?
Source: AIG 2019 Plan for 100 Survey.
Note: Response total exceeds 100% due to rounding.
of Americans surveyed say they fear running out of money more than death.
59%
Top worries of living to 100: health problems, being a burden, and running out of money Q: What is the greatest worry you have about living to 100?
Serious health problems
Being a burden on family
Running out of money to live comfortably
Being lonely
Not having a purpose
Having nothing left to leave my children/grandchildren
35%
27%
25%
5%
3%
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A look back at the stock market.
The stock market has a history of volatility
Preparing for the unexpected.
When it comes to investing in the stock market, it’s important to remember that, while the long-term trend of the market has been positive, there have been periods of significant price declines, which can come at the wrong time if you are recently retired or nearing retirement. Of course, past performance is not indicative of future results.
This illustration is based on historical S&P 500® Index Adjusted Daily Closing Prices for the period 1/3/95 – 6/30/20. Price return only. Does not include dividend reinvestment. The S&P 500® Index is one of the most commonly used benchmarks for the U.S. stock market. Indexes are unmanaged. You cannot invest directly in them. Performance illustrated is not indicative of future results.
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June 30, 2020 (3,100.29) +358%
October 9, 2007 (1,565.15) +101%
March 24, 2000 (1,527.46)
October 9, 2002 (776.76) -49%
March 9, 2009 (676.53) -57%
S&P 500 Index
3500
3000
2500
1500
1000
500
0
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Jan-17
Jan-19
Jun-20
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Retirement may be viewed as a series of three spending phases.
The “Go-Go Years,” “Slow-Go Years” and “No-Go Years.” If you're like many other Americans, your spending in most expense categories will generally decline throughout retirement.
Investing for long-term growth potential and diversifying your portfolio.
These two key strategies may be important to consider when preparing for today's longer requirements.
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You may need the most money early in retirement
The three phases of retirement.
Typically, newly retired people spend more money than those who have been retired for a few years due to more travel, recreation, or care for elderly parents. But over the long term, living expenses — other than health care — tend to decline. Retirees in the highest age brackets usually stop spending money on durable goods, are less likely to make home improvements and may spend less money on travel, entertainment or meals out.
The Early Years: “Go-Go Years”
The Middle Years: “Slow-Go Years”
The Later Years: “No-Go Years”
Income need: High
Income need: Moderate
Income need: Low
Typically the most active: • Travel • Vacation home or home improvements • Grandchildren
Typically slowing down: • Less travel • Downsizing
Typically the least active: • Stay close to home • Not as much entertainment
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Spending in retirement.
Consider how your needs may evolve
Spending generally declines over time.
It’s often assumed that expenses will remain the same throughout retirement — or possibly even rise due to inflation. However, research shows that expenditures generally decline throughout retirement. As you can see illustrated in this table, total expenditures for those age 75+ are 35% less than those age 55 – 64.
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditure Survey, September 2019.
Total annual expenditures by age
Apparel & services
Annual spending
Age 55 – 64
Age 65 – 74
Age 75+
% change 55 – 75+
Entertainment
Food & alcohol
Health care
Housing
Transportation
Miscellaneous & other
Personal insurance & other
Total Expenditures
Total expenditures
$66,212
$56,268
$43,181
$1,837
$3,755
$8,652
$5,743
$20,907
$10,444
$6,414
$8,460
$1,460
$3,801
$7,884
$6,711
$18,007
$8,810
$5,498
$4,097
$842
$1,763
$5,855
$6,930
$15,427
$5,098
$4,472
$2,794
-54%
-53%
-32%
+21%
-26%
-51%
-30%
-67%
-35%
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Invest for long-term growth potential.
Consider how stocks have performed over time
Positive performance over time.
Over an 83-year period examined, stocks generated gains in the majority of years. The average returns for the S&P 500 were positive in 76% of the years from 1937 to 2019. Keep in mind, the stock market’s returns vary tremendously as shown and past performance is not a guarantee of future results. An investment in stocks involves risk, including potential loss of principal.
Source: Legg Mason, “The Rewards of Long-Term Investing,” 2020.
10.4% average annual return: 1937 – 2019
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20
negative years
-12.2%
average negative return
63
positive years
19.6%
average positive return
Positive versus negative annual returns for the S&P 500 (1937 – 2019)
The importance of diversification and staying invested.
Is your portfolio diversified?
It can pay to diversify.
While stocks have offered strong growth potential and have historically provided an effective hedge against inflation over the long term, diversifying your investment among stocks and bonds may help offset short-term volatility and smooth out returns over time. Of course, past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against market loss. There is no assurance that a diversified portfolio will outperform a non-diversified portfolio.
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Low interest rates.
When interest rates are low, it can be particularly challenging to generate enough income from fixed income investments.
Outdated rules?
You may not be able to count on traditional approaches for generating retirement income from your investment portfolio, such as the “4% Rule.”*
Potential solutions.
An annuity is one potential solution for generating the additional guaranteed lifetime income you may want and need to help cover your expenses in retirement.
*The 4% Rule is a long-held rule for withdrawing retirement income from an investment portfolio. Based on research pioneered by financial planner William Bengen in 1994, the rule suggested that one could safely take 4% inflation-adjusted withdrawals each year from an investment portfolio of stocks and bonds (50% stocks/50% bonds) without running out of money over a 30-year period.
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Market performance.
Market performance in the early years of retirement can impact how long your savings may last.
A case of declining yields.
Generating income in a low-rate environment.
Looking for more yield in today’s low interest rate environment?
Retirees have often turned to fixed income products to help generate the predictable retirement income they need. Unfortunately, the yields on many fixed income products have declined sharply in recent years. This can make generating income from these types of products particularly challenging.
Yields shown are as of 12/31, unless otherwise noted. 1. U.S Department of Treasury. 2. Federal Deposit Insurance Corporation (FDIC). 3. Federal Reserve Bank of St. Louis.
Case of declining yields
2013
2020*
2007
Money market (3-month Treasury bills) yield
5-year CD yield
U.S. 10-year Treasury yield
U.S. 30-year Treasury yield
U.S. corporate investment grade yield
1
2
3.37%
3.73%
4.04%
4.45%
5.80%
0.07%
0.74%
3.04%
3.96%
3.35%
0.16%
0.50%
0.66%
1.41%
2.22%
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*As of 6/30/20.
The ‘4% Rule‘ has become the ‘2.29% Rule.‘
One longstanding ‘rule‘ for generating income may no longer be viable.
A look at sustainable withdrawal rates in today’s environment
If you thought you could count on the “4% Rule” for generating retirement income from your portfolio, you may have to think again. Research shows that in today’s interest rate and market environment, you may only be able to withdraw 2.29%, adjusted for inflation, from a portfolio allocated 50% to stocks and 50% to bonds and have a high degree of confidence that your money will last over a 30-year retirement.
Notes: The conservative strategy uses a 25% stock allocation and seeks a 95% chance that real wealth will not fall below 20% of its initial level by year 35 of retirement. The moderate strategy uses a 50% stock allocation and seeks a 90% chance that real wealth will not fall below 15% of its initial level by year 30 of retirement. The aggressive strategy uses a 75% stock allocation and seeks an 80% chance that real wealth will not fall below 10% of its initial level by year 25 of retirement. Analysis assumes that withdrawals are made at the start of each year, retirees earn the underlying indexed market returns, and market return simulations are based on capital market assumptions starting from interest rate levels in April 2020. Market assumptions defined at www.retirementresearcher.com/dashboard.
Source: Wade D. Pfau, Ph.D., CFA, www.retirementresearcher.com/dashboard.
Sustainable withdrawal rates
from an investment portfolio as of April 2020
Investment strategy
Conservative
Moderate
Aggressive
Inflation (CPI-U) Adjusted Spending (i.e. “the 4% Rule”)
1.55%
2.29%
3.41%
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The ‘4% Rule‘ — then and now.
What worked in the past...
What a difference a decade makes to one longstanding rule for generating income
Research from AllianceBernstein reveals that the failure rate of a ”4% Rule” approach has dramatically increased over the last decade. With a new decade upon us, it may be time for a different approach for helping clients generate sustainable lifetime income from their investments.
Data does not represent past performance and is not a promise of actual or range of future results. An investor cannot invest in an index. *Based on 55% Stocks/35% Bonds/10% REITs. **Based on 60% Stocks/40% Bonds.
Source: AllianceBernstein. Studies based on a 4% withdrawal rate over 30 years, adjusted annually for inflation. Neither study accounted for the impact of taxes. Based on AllianceBernstein’s estimates of the range of returns for the applicable capital markets over the next 30 years. Chances of plan failure refers to the percentage of the 10,000 probable scenarios tested where a portfolio (with specific allocations, time horizon and initial withdrawal rate adjusted annually for inflation) runs out of money too soon. If the probability of plan failure exceeds 10%, AllianceBernstein does not consider that plan to have a statistically sound threshold of reliability.
2008
2019
Probability of plan failure*
Probability of plan failure**
%
27
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Key retirement risks.
Preparing for the unknowns.
Today’s pre-retirees and retirees face a number of key risks
Those seeking to generate reliable income from their savings and investments face several key risks that need to be managed. • Where is the stock market headed next? • How long will your retirement last? • Where can you go to generate more income in today’s low interest rate environment?
1. Sources: Finance.yahoo.com and U.S. Department of the Treasury. Figures shown have been rounded. 2. Source: AIG 2019 Plan for 100 Survey. 3. As of 6/30/2020.
Market risk
Longevity risk
Interest rate risk
The stock market can be volatile.
59% of Americans surveyed fear running out of money more than death.
Fixed income yields are near historic lows.
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Market performance can impact how long your savings may last.
Returns in the early years can be disproportionately powerful.
How will the sequence of returns impact your retirement?
Sequence of returns risk refers to the order of positive and negative investment returns — and how such returns may impact your investment and its ability to generate income. As shown here, the investment return in the first three years of retirement accounts for more than 30% of the ultimate success or failure of a retiree’s withdrawal strategy. Sustainable withdrawal rates are disproportionately explained by what happens in the early part of retirement. A market downturn early in retirement can have lasting effects.
Source: Wade D. Pfau, Ph.D., CFA, How Much Can I Spend in Retirement?, 2017. Please see page 28 for additional details.
Retirees are most vulnerable to sequence of return risk in the initial years of retirement.
Once distribution begins, the sequence is more critical.
During accumulation, the sequence of returns is less important.
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Year 31: The first year of retirement
The explanatory power of each year's return
Market performance — impact during savings years.
The sequence of returns has no impact on the final portfolio value when you are saving.
It’s important to understand sequence of returns
• Three investors made the same initial hypothetical investment of $1,000,000 at age 40 with no additions or withdrawals. • All had an average return of 7% over 25 years. However, each experienced a different sequences of returns. • At age 65, all had the same portfolio value, although they had experienced different valuations along the way.
Source: BlackRock. This graphic looks at the effect the sequence of returns can have on your portfolio value over a long period of time. Other factors that may affect the longevity of assets include the investment mix, taxes and expenses related to investing. This is a hypothetical illustration. This illustration assumes a hypothetical initial portfolio balance of $1,000,000 with no additions or withdrawals and the hypothetical sequence of returns noted in the table. These figures are for illustrative purposes only and do not represent any particular investment, nor do they reflect any investment fees, expenses or taxes. Each five-year sequence is repeated five times and has an average annual return of 7%.
Three unique return scenarios
% yearly total returns
Ending value
$5,434,372
Age
Mrs. Jones
Mr. Smith
Mr. Brown
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Mrs. Jones – favorable returns in the Early Years
Mr. Smith – Bad returns in the Early Years
Mr. Brown – Steady returns
Data courtesy of BlackRock, Inc.
Market performance — impact once withdrawals begin.
The sequence of returns can have a critical impact on portfolio value when you are taking withdrawals.
Now let’s take a look at what happen once withdrawals begin. The sequence of return scenarios used here are identical to those used on the prior page.
• Three investors made the same initial hypothetical investment of $1,000,000 upon retirement at age 65. • All had an average annual return of 7% over 25 years, which followed the same sequences as during the savings phase. • All made withdrawals of $60,000, adjusted annually for inflation. • At age 90, all had different portfolio values due to annual withdrawals.
Source: BlackRock. This graphic looks at the effect the sequence of returns can have on your portfolio value over a long period of time. Other factors that may affect the longevity of assets include the investment mix, taxes and expenses related to investing and the number of years of retirement funding (life expectancy). This is a hypothetical illustration. This illustration assumes a hypothetical initial portfolio balance of $1,000,000, annual withdrawals of $60,000 adjusted annually by 3% for inflation and the hypothetical sequence of returns noted in the table. These figures are for illustrative purposes only and do not represent any particular investment, nor do they reflect any investment fees, expenses or taxes. When you are withdrawing money from a portfolio, your results can be affected by the sequence of returns even when average return remains the same, due to the compounding effect on the annual account balances and annual withdrawals.
*These sequences of returns are identical to those on the prior page. Mr. White depleted his account at age 88. Had his portfolio not run out, he would have experienced returns of 15% and 22% at ages 89 and 90, respectively, thereby continuing the same sequence of returns. Data courtesy of BlackRock, Inc.
Three unique return scenarios*
$1,099,831
Mrs. Doe
Mr. White
Mr. Rush
$0
$430,323
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Mrs. Doe – Favorable returns in the Early Years
Mr. White – Bad returns in the Early Years
Mr. Rush – Steady returns
66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90
22 15 12 -4 -7 22 15 12 -4 -7 22 15 12 -4 -7 22 15 12 -4 -7 22 15 12 -4 -7
-7 -4 12 15 22 -7 -4 12 15 22 -7 -4 12 15 22 -7 -4 12 15 22 -7 -4 12 - -
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
Are you comfortable rolling the dice when it comes to your retirement income?
Consider these probabilities as you think about your withdrawal strategy
If your withdrawal rate is too high when generating income from a portfolio of assets, research shows that it lowers the probability of income lasting over a 35-year retirement. As shown to the left, assuming a 4% withdrawal rate and a portfolio allocated 60% to stocks and 40% to bonds, there would be a 19% chance that your portfolio would fail to provide lasting income over a 35-year retirement.
Source: T. Rowe Price, 2020. Projections shown above assume the withdrawal in the first year is the stated percent of the original portfolio value. Each year thereafter, the amount withdrawn is adjusted upward 3% to account for inflation. IMPORTANT: This illustration is hypothetical in nature, does not reflect actual investment results and is not a guarantee of future results. © 2020. T. Rowe Price. All rights reserved. Used with permission. See page 28 for additional information.
The hypothetical table shows the probability that your assets will last through a 35-year retirement, given certain withdrawal rates and stock/bond allocations.
35-year retirement
Stock/bond mix
Initial withdrawal amount
20/80
40/60
60/40
80/20
100/0
4%
98%
99%
96%
94%
67%
78%
81%
80%
24%
44%
55%
60%
62%
16%
41%
46%
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Shifting sources of retirement income.
Today’s wobbly, two-legged stool of retirement income.
Today’s retirees are responsible for funding a larger portion of their retirement income themselves
In the past, retirees could typically rely on the “three-legged stool” of retirement income: 1) Social Security 2) Personal savings and investments 3) A pension from their employer Unfortunately, for many, that three-legged stool has devolved into a wobbly, two-legged stool of just Social Security and personal savings and investments, given the decline in the number of companies offering traditional defined-benefit pension plans.
Source: Employee Benefit Research Institute and Greenwald & Associates, “2019 Retirement Confidence Survey Summary Report,” April 23, 2019.
Only
of retirees say they rely on personal savings or investments as a source of income in retirement.
69
of those who are still working expect a pension plan from their employer to be a major source of retirement income.
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Generating income from your savings and investments.
Looking for additional guaranteed lifetime income?
Consider other ways to cover your expenses in retirement
If you don’t have enough income from guaranteed sources (such as Social Security or a pension) to cover your essential lifestyle expenses in retirement, you may want to consider purchasing an annuity. You can use this table with the help of your financial professional to determine how much money you would need to allocate to an annuity to generate a specified amount of annual income.
Annuity income protection features may be standard or optional. Additional fees, withdrawal parameters, age restrictions and other limitations apply. With certain variable annuities, investment requirements may also apply. To realize the benefits of an income protection feature, you will need to take withdrawals within certain parameters. With certain variable annuity income protection features and income options, after lifetime income activation the amount available for lifetime income will be reduced if the contract value is completely depleted due to market volatility, deduction of fees and/or withdrawals taken within the feature’s parameters. Depending on the performance of your annuity and your income needs, you may never need to rely on the protection provided by an income protection feature. Please see a product brochure or prospectus for complete details about the annuity you may be considering, including limitations and risks. See page 29 for additional information about annuities.
Your essential lifestyle income gap
Your initial withdrawal rate
7%
$10,000
$20,000
$40,000
$666,667
$333,334
$1,333,334
$500,000
$250,000
$1,000,000
$400,000
$200,000
$800,000
$166,667
$285,715
$142,858
$571,429
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$50,000
$1,666,667
$1,250,000
$833,334
$714,286
$750,000
$600,000
$428,572
$30,000
Essential lifestyle expenses are the needs of daily living and maintaining the lifestyle you desire, such as the cost of your home, food, clothing, transportation and health-care expenses. Of course, an annuity may also be used to generate income to help cover discretionary lifestyle expenses.
Amount of money needed to cover an income gap assuming different initial withdrawal rates
Benefits of annuities for protected lifetime income.
Annuities offer a powerful combination of benefits.
You can choose from different types of annuities
When it comes to securing reliable income in retirement, an annuity can offer you a number of key benefits, including protected lifetime income for as long as you — or you and your spouse — live, depending on your choice of a Single Life or Joint Life income option. Ask your financial professional if an annuity may be an appropriate solution for your retirement income needs.
* Available through the optional income benefit or annuitization (at no cost). ** Available through annuitization only. *** If the contract is annuitized, you may no longer access principal. See page 29 for additional information about annuities. Be sure to ask your financial professional for complete details about the annuity you may be considering, including limitations and risks. Products may not be available in all states or may vary by state. Contract and benefit guarantees are backed by the claims-paying ability of the issuing insurer.
A look at the different types of annuities and several key benefits
Variable annuities
Guaranteed lifetime income
Income with growth potential
Access to principal
Market participation
Increase options available
(withdrawal charges may apply)
(withdrawal charges and MVA may apply)
No, but they provide potential for interest to be credited based in part on the performance of a specified index.
No
**
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Index annuities
Fixed annuities
Immediate annuities
Deferred income annuities
*
***
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Additional information
• “Market performance can impact how long your savings may last”: The chart shown attempts to illustrate more clearly how sequence of returns risk impacts both the accumulation and distribution phases. It is based on simple regressions which determine how much of the outcome (wealth accumulation or sustainable withdrawal rate) can be explained by the returns experienced in each year of the life cycle. The chart isolates the impact of each year’s return on lifetime outcomes using a sample of 100,000 Monte Carlo simulations. For the first 30 years when individuals are saving, the percentage of the final wealth accumulation at the retirement date that can be explained by each annual investment return grows from year 1 through year 30. With wealth accumulations so low in the early part of one’s career, the early returns have very little impact on the absolute level of wealth accumulated at the end of the savings period. But as retirement approaches, a given percentage return produces an increasing impact on the final wealth value in absolute terms, leaving individuals particularly vulnerable to these later returns. As for years 31 – 60, the individual has entered the distribution or retirement phase, and the chart shows the impact of each year’s return on the maximum sustainable withdrawal rate experienced by retirees. The return in year 31 represents the first year of retirement, and the result in this first year explains more than 12% of the final outcome for retirees. • “Will you outlive your retirement income?”: The hypothetical table is based on Monte Carlo Analysis and assumes a 35-year retirement. The initial withdrawal amount is increased 3% annually for inflation. Monte Carlo Analysis is hypothetical in nature, does not reflect actual investment results, and is not a guarantee of future results. It is based on a number of assumptions. There can be no assurance that the results shown will be achieved or sustained. Results may vary, and such results may be better or worse than the simulated scenario. Underlying long-term expected annual returns for the asset classes are not based on historical returns. Rather, they represent assumptions that take into account, among other things, historical returns. They also include T. Rowe Price estimates for reinvested dividends and capital gains. These assumptions, as well as an assumed degree of fluctuation of returns around these long-term rates, are used to generate random monthly returns for each asset class over specified time periods. The monthly returns are then used to generate thousands of scenarios, representing a spectrum of possible return outcomes for the modeled asset classes. Success rates are based on these scenarios.
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Additional information (continued)
• “Generating income from your savings and investments”/”Benefits of annuities for guaranteed lifetime income”:
• Annuities: Annuities are long-term financial products designed for retirement purposes. In the Accumulation phase, they can help you build assets on a tax-deferred basis. In the Income phase, 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 optional income protection benefit. Certain variable annuities, index annuities and fixed annuities offer income protection benefits, which are 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 index annuities and fixed 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. • Variable annuities: Variable annuities offer professional money management, along with insurance features (such as a guaranteed death benefit and annuity income options) that you pay for through what is called a separate account fee. Variable annuities are subject to additional fees, including a contract maintenance fee, expenses related to the operation of the variable portfolios, and the costs associated with any optional features, if elected. Early withdrawal charges may apply. Partial withdrawals may reduce benefits available under the contract as well as the amount available upon a full surrender. An investment in a variable annuity is subject to risk, including the possible loss of principal. The contract, when redeemed, may be worth more or less than the total amount invested. • Index annuities: 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, without the risk of loss of premium due to market downturns or fluctuations. Index annuities may not be suitable for all individuals. • Fixed annuities: Fixed annuities offer a rate of return guaranteed by the insurance company. Although not all fixed annuities offer income protection benefits, most offer a range of income options through annuitization, including the opportunity for guaranteed lifetime income. • Immediate annuities and deferred income annuities: These types of annuities offer a range of income options, including the opportunity for guaranteed lifetime income. These types of annuities permanently convert principal into a guaranteed income stream.
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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 and securities 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 information is general in nature, may be subject to change and does not constitute legal, tax or accounting advice from any company, its employees, financial professionals or other representatives. Applicable laws and regulations are complex and subject to change. For advice concerning your situation, consult your attorney, tax advisor or accountant. Products and features may vary by state and may not be available in all states. The purchase of an annuity is not required for, and is not a term of, the provision of any banking service or activity. Annuities are issued by American General Life Insurance Company (AGL), Houston, TX, except in New York, where they are 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. AGL, US Life and ACS are members of American International Group, Inc. (AIG).
Not FDIC or NCUA/NCUSIF Insured
May Lose Value • No Bank or Credit Union Guarantee Not a Deposit • Not Insured by any Federal Government Agency
M6060FLP (8/20)
