WHAT IS AN ANNUITY?
An annuity is essentially a contract between you and an insurance company.
There are different types of annuities, and some are designed to grow and protect your money. Fixed, Hybrid, and Fixed Index Annuities are designed to do this, while Variable Annuities invest your money in stocks and mutual funds aim to grow your money, but don’t guarantee your principal. Fixed, Fixed Indexed, Hybrid, and Variable Annuities can each provide a stream of income in retirement, somewhat like a pension. There are also Immediate Annuities. Individuals make payments to an insurance company in exchange for an immediate stream of income for a specified period of time. Other types of annuities will pay out for the rest of your life and the rest of your spouse’s life, if desired.
How Do Annuities Work?
STEP 1
You purchase an annuity by making a payment to an insurance company.
STEP 2
Your annuity can grow over time.
STEP 3
An annuity can either be used as a cash accumulation investment or a way to get an immediate, steady stream of income.
WHY CONSIDER FIXED, HYBRID, AND FIXED INDEXED ANNUITIES?
• They can offer protection and growth
• Growth can be tax-deferred
• Replace a paycheck with a source of retirement income
• It can offer an efficient way to leave a legacy for loved ones
THERE ARE COMMON MISCONCEPTIONS ABOUT ANNUITIES
- They are not ownership of shares of any individual stock, index fund or mutual fund.
- They are not a bond or a certificate of deposit (CD).
- They are not insured by the FDIC, like a bank CD or a checking or savings account, or by any federal government agency, or guaranteed by a bank or credit union. Annuity guarantees are backed by the financial strength of the issuing insurance company.
- They are not available for “instant access” like a bank account. Only a portion of your money is available each year.
We can help you achieve guaranteed income and safety in retirement.
SPEAK TO AN ANNUITY EXPERT TODAY
ANNUITIES CAN BE GUARANTEED BY STATES
A state guaranty fund is administered by each U.S. state to protect insurance policyholders who reside in that state at the time the insurance company defaults on benefit payments or becomes insolvent. Typically, up to $250,000 to $300,000 is protected, but in some states, up to $500,000 is protected.
HOW DOES THE STATE GUARANTY SYSTEM WORK?
State funds act as a form of insurance for annuities. Most states get money from assessments of insurance companies after the company is insolvent. At that point, the insurance department determines the value of the company’s remaining assets and calculates the amount needed to pay claims. State law usually specifies a maximum amount that insurers may be assessed, which is typically one to two percent of the net premium an insurer collects in any given state.
For more information, see the National Association of Insurance Commissioners.
ANNUITY CONTRACTS GUARANTEE
Every state can have a different way of setting up the guaranty funds that can affect the cost to insurers and how much protection annuity owners receive. There are generally two types of protection:
1) The state can put an insurance company with liquidity problems into rehabilitation to try to save it from insolvency. If this fails, the state government will take it over and liquidate the assets to satisfy its obligation to policyholders.
2) If more funds are needed, the state guarantee fund kicks in. States usually have guarantee funds for life and health insurance, and a different type for property and casualty (car, home) insurance.
Types of Annuities
| Benefit | Variable | Fixed | Immediate | Fixed Indexed |
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| Guaranteed income for life for you and your spouse |  |
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| Cost-of-living adjustment | |
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| Guaranteed minimum withdrawal benefits | |
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| Protection against market losses | |
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| Access to your funds, up to a specified limit | |
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| Potential to leave a legacy to heirs | |
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