What to Consider
Immediate or Deferred
Should I choose an immediate or deferred annuity?
Perhaps the first important consideration in buying
an annuity is determining whether you need access to your money right now or
further down the road. If you have an urgent income need, then you should think
about buying an immediate annuity, which offers you a steady stream of income
immediately after purchase. If you can wait to draw upon annuity payments later
(e.g., as part of your retirement income), then a deferred annuity enables you
to receive payments after an elapsed period of time - for example, five, seven,
or ten years after purchase. Look at your overall financial situation and
current stage of life in making this decision.
Is there a minimum amount required to purchase a contract?
One important aspect to consider when buying an annuity is which type is right for you.
Most annuities have minimum Purchase Payments and may or may not allow multiple
premiums. Keep in mind that some variable annuities and flexible premium
annuities may offer payroll deduction, with minimum Purchase Payment
requirements of $50 or less. Others need a single lump sum with certain minimum
requirements, depending on the product. Consider what works best for you and
meets your retirement needs before choosing.
Interest Rates and Fees
What will my interest rate be on my annuity, and will I have to pay yearly fees?
Different types of annuities offer you different protection and opportunities
when it comes to interest rates. Fixed annuities offer you the protection of an
interest rate that is fixed and guaranteed never to be below a minimum amount.
Variable annuities do not offer that protection, but allow you the opportunity
to earn higher interest rates based on the market. Fixed-indexed annuities offer the protection of a fixed rate as
well as the potential to earn a higher interest rate based on a referenced
index, but with the guarantee that you will never have a negative interest
Generally, fixed and fixed-indexed annuities do not charge up-front sales or
administrative fees but may have surrender charges. Variable annuities may
require maintenance and administrative fees because of the complexity of the
What are the charges for a variable annuity?
A charge to consider when purchasing a variable annuity is the mortality and
expense charge. This annual charge is in addition to the surrender charge and
is used to pay for the additional risks involved with a variable annuity
contract, such as the payments that may be made during the benefit payment
period and the guaranteed death benefit.
Another charge to consider is the annual administration charge. This annual
charge is used to pay for the expenses incurred in administering the contract
and the variable annuity's separate account.
When purchasing a variable annuity, you can find specific information regarding
contract charges in the contract's prospectus.
Withdrawals and Loans
What if I need to access some of my money during the accumulation phase?
Annuities are long-term instruments designed to accumulate money for retirement and provide their best
possible benefit if left intact, without taking withdrawals. However, it's nice
to know that you have access to the funds in your annuity if you need them.
Many of the products offered by GAFRI subsidiaries provide a number of options to withdraw the money in
your annuity, including 10 percent Penalty-Free Withdrawals and Interest
Withdrawals through the Easy Systematic Payment Program. Remember that for
certain products withdrawals prior to age 59½ may be subject to restrictions
and a 10 percent tax penalty, according to IRS regulations. Also, certain withdrawals may be subject to charges.
Are there any special features that will protect me if I get sick or need long-term care?
Yes, some of the annuities offered by the insurance subsidiaries of GAFRI may include the following waivers to help ease the
strain of unforeseen events:
Extended Care Waiver - An Extended Care Waiver may be
available for no additional charge. If, after the first contract year, the
owner is confined to a nursing home or other long-term care facility for at
least 90 consecutive days, early withdrawal charges may be waived on
withdrawals up to a full surrender.
Terminal Illness Waiver - After the first contract year, if you
are diagnosed by a physician as having a terminal illness (prognosis of
survival is 12 months or less), you may have the option with the Terminal
to withdraw up to 25 percent of the annuity's account value
without incurring an early withdrawal charge. There is no additional charge for
this waiver, but the withdrawal provision may be used only once over the
duration of the contract.
What happens if I die before I have begun receiving payments from my annuity?
In the unfortunate event of the death of the contract owner, the beneficiary
will receive a death benefit from the annuity. In the event of the contract
owner's death before income payments have begun, in most cases, the beneficiary
will be paid the Account Value (this could vary for some products). If your
spouse is the surviving joint owner or sole beneficiary, then he or she may
have the right to succeed to the ownership of the annuity with all rights and
privileges of the original owner, as allowed by IRS regulations.
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