Annuities
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company.
Fixed
- Withdrawals may be subject to surrender charges during the early years of the contract, and funds withdrawn from any annuity prior to age 59½ may be subject to a 10% IRS penalty.
- Unlike a Share Certificate or CD, your earnings compound on a tax-deferred basis.
- While fixed annuities are very secure, they’re not insured by the National Credit Union Share Insurance Fund (NCUSIF) or its counterpart the FDIC. They are guaranteed by the company that issues them, which is why it is important to understand the ratings of the issuing company.
There are distinct differences between annuities and Certificates of Deposit, or CDs. Most CDs are considered a short-term investment. An annuity is considered a long-term investment. The investment in a CD is insured by the federal government, either through FDIC or NCUA. The investment in an annuity is guaranteed by an insurance company. Like CDs, fixed annuities have a penalty for early surrender, and withdrawals taken before the age of 59½ from an annuity may be subject to a 10% federal tax penalty.
Variable
- During the accumulation phase, you make purchase payments and allocate the money among investment options offered as you see fit. The variable annuity has “subaccounts” which let you move money around to different money managers with different investing objectives and instruments. There are typically no extra fees for these moves.
- Your money grows tax-deferred until you take a distribution. All the funds, including those that would be used to pay taxes, are allowed to remain in the account to grow.
Variable annuities are long term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They have fees and charges, including mortality and expense risk charges, administrative fees, and contract fees. They are sold only by prospectus. Guarantees are based on the claims paying ability of the issuer. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value.
Indexed
- Similar to fixed annuities, you receive a minimum income guarantee and no market exposure to downsides.
- All the gains you make – any gains from previous years – can be locked in and never go down.
- While you’re protected from losses, some annuities may put an upper limit, or cap, on the index-linked gain you can make.
- While the floor for most market investors can be anywhere, including a very negative outcome for their money, yours can be zero.
Fixed Indexed Annuities (FIA) are not suitable for all investors. FIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. FIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims-paying ability of the issuing insurance company.
Single Premium
- You purchase a payout annuity with a single payment, which means you decide up front what you have to spend and what you need in return. You typically can’t add money to the annuity later on.
- You can often choose to be paid monthly, quarterly, semi-annually or annually – whatever works best for you.
- You may have options to guarantee income for a set period of time or for as long as you live. Your payout can be a fixed amount or adjusted for inflation. And there are ways to guarantee an income for you or both you and a spouse. You’ll even have choices to make sure that no matter how long you live, you or your beneficiaries will receive your principal back.
- For payout annuities that aren’t part of a retirement plan like an IRA, each payment you receive will be part return of principal and part earnings. You’ll pay taxes when you receive the payment but only on the earnings portion. That helps keep taxes down.
| Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value |
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