The Standard’s annuities offer growth potential while providing safeguards to protect your hard-earned savings.
The Standard’s annuities offer growth potential while providing safeguards to protect your hard-earned savings.
An annuity is a contract between you and an insurance company in which the company agrees to pay you income payments in exchange for your premium. Depending on if you purchase an immediate annuity or a deferred annuity, your income payments can begin right away or be postponed until later. The income you receive depends on the premium you paid, your interest earnings, how long funds are left to accumulate and how long you choose to receive payments.
With payment options providing lifetime income, annuities are a popular way to fund retirement. Fixed annuities have traditionally been conservative, safe, long-term investments and are increasingly viewed as strong alternatives to products that may be subject to lower returns, annual income taxes or volatile market risk.
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Deferred annuities postpone your income payments until later and accumulate interest earnings on your principal. This differs from immediate annuities, which generally are considered income, rather than growth, products and provide payments immediately. Income taxes on deferred annuities also are postponed until you make withdrawals or begin receiving regular income payments, usually during retirement, when you may be in a lower tax bracket. This contrasts with products that are subject to annual income taxes, such as bank certificates of deposit.
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Immediate annuities are designed to provide income rather than accumulation. You are most likely to purchase an immediate (or income) annuity if you wish to convert accumulated assets into income payments, which generally begin immediately. The amount of income you receive depends on your chosen income option, which can be period specific or for a lifetime, just for yourself or for yourself and a beneficiary.
An annuity is an ideal savings vehicle if you are seeking the benefits of tax-deferred growth, principal protection and generous access to funds. Few taxable investments can provide this blend of safety, growth and flexibility.
Fixed annuities guarantee to pay a specified interest rate that generally is based on the current rate environment. The initial rate is guaranteed for one or more years, and subsequent renewal rates are guaranteed not to fall below a specified minimum rate. Because they provide several guarantees, fixed annuities are viewed as conservative financial products.
Indexed annuities offer the ability to participate in some gains associated with a rising stock market while providing some minimum guarantees. Some indexed annuities provide more guarantees than others and the scope of the guarantees generally affects the annuity’s returns.
Variable annuities offer earnings and income payments that fluctuate according to the performance of specific investment funds. While variable annuities potentially provide high returns, they differ from fixed products in that the policyowner bears investment risk and possible loss of principal. For these products selling agents must be licensed to sell securities.
Single premium annuities are purchased with single, lump-sum premium payments, although some single premium annuities now accept additional premiums during a limited, specified time period.
In contrast, flexible premium annuities accept several premium payments during the life of the contract. These premiums generally can be of varying amounts as long as an annual minimum is met.
Qualified status refers to IRAs and employer-sponsored savings plans like 401(k)s and TSAs. These receive special IRS tax treatment, including possible tax deduction for premiums or contributions. Non-qualified means that the money receives no special IRS tax benefits, other than those of tax-deferred growth in the annuity.
The following applies if the annuity is purchased through a bank or a credit union: (a) the annuity is not a deposit; (b) the annuity is not guaranteed by any bank or credit union; (c) the annuity is not insured by the FDIC or any other governmental agency; (d) the purchase of an annuity is not a provision or condition of any bank or credit union activity; and (e) some annuities are subject to investment risk and may go down in value.
Product availability varies by state.
12468 (08/05)