An annuity is a common way to save for retirement with tax advantages, and to convert assets into a regular income stream during retirement.
You can buy an annuity using a single deposit, or with flexible, ongoing premiums over time. Some annuities are available for shorter or longer time periods.
In New York, we may offer state-specific annuities, and not all products are available.
An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals.
People typically purchase annuities to provide or supplement retirement income they will receive from Social Security, pension benefits, investments and other sources. You can convert your annuity into a stream of income that can then be paid over a fixed period or for your lifetime. You can take withdrawals of varying amounts when you need the income.
Provides income payments that normally begin within a year after the premium is paid.
Provide income payments that begin later, often after many years. Deferred annuities are designed for long-term savings purposes.
A SPDA is a tax-deferred indexed annuity that will only accept a single payment made to the insurance company or through a transfer or rollover.
An FPDA is a tax-deferred indexed annuity that accepts multiple premium payments while the annuity is in its accumulation period. Payment methods may include salary reduction payments, bank draft or pre-authorized check plan payments, transfers, rollovers, and single sum direct payments.
A fixed single premium annuity is a tax-deferred annuity that will only accept a single payment made directly to insurance company or through a transfer or rollover.
A Multi-Year Guaranteed Annuity (MYGA) is a fixed single premium annuity that guarantees an interest rate for a specific period, for example three or five years.
MYGA
Annuities offer a way to grow savings based on a fixed interest rate or on the performance of an index.
Fixed annuities
Indexed annuities
Yes you can. IRC Section 1035 allows for a tax-free exchange of one annuity for another. Before you decide to exchange one annuity for another, you will also want to consider any surrender charges that may be applied upon surrender of the contract as well as the new surrender penalty schedule for the new annuity you plan to purchase.
Withdrawals from annuities purchased after August 14, 1982, are taken from earnings first. You will be required to pay income taxes on all earnings taken from the contract. Once you have withdrawn earnings, withdrawals will be made from the premiums paid into the policy. Withdrawals of premium are not subject to income taxes.
If you take withdrawals prior to age 59 ½, withdrawals that are made from the earnings in your contract may also be subject to a 10% premature distribution penalty. Withdrawals of premiums paid are not subject to the premature distribution penalty.
Yes, beneficiaries will be taxed on the tax-deferred interest when they receive those dollars. However, if a beneficiary is the spouse of the owner and the owner dies, he/she may elect to continue the annuity and postpone taxes. If the beneficiary is not the spouse and the owner dies, then the funds must be totally withdrawn within five years or they may be received over the beneficiary’s life expectancy, as long as the beneficiary elects this option within the first 12 months following the annuity owner’s death.
1 Buying an annuity within an IRA or other tax-deferred retirement plan doesn’t give you any extra tax benefits. If considering an annuity within a retirement plan, base your decision on the annuity’s other features and benefits as well as its risks and costs, not on its tax benefits. Withdrawals prior to age 59 ½ may be subject to a 10% Federal Tax Penalty.
2 Guarantees are based on the claims-paying ability of the issuing company.
3 Standard & Poor’s®, “S&P®, S&P 500®, Standard & Poor’s 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Life Insurance Company of the Southwest. The product is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the product.
4 Assuming no withdrawals during the withdrawal charge period. Rider charges continue to be deducted regardless of whether interest is credited.
TC143416(0824)3
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