Annuity
An annuity is a contract with an insurance company designed to help you accumulate funds and, depending on the contract, receive income immediately or at a future date. At MB FINANCIAL & INSURANCE SERVICES, we help California clients understand the available annuity options and the features, costs, and risks to consider before making a decision.
Understanding Annuities
Annuities can be funded with a lump-sum payment or a series of payments. Depending on the type of annuity and contract terms, earnings may grow on a tax-deferred basis, and the contract may provide income payments or certain death-benefit features.
Because annuity products vary considerably, understanding how each one works is an important part of choosing coverage that fits your financial circumstances and goals.
Immediate or Deferred Annuities
Immediate annuities generally begin making income payments shortly after purchase, making them an option for individuals seeking income relatively soon.
Deferred annuities allow funds to accumulate before income payments begin, potentially providing income at a later date, such as retirement.
Fixed, Variable, and Index-Linked Annuities
Fixed annuities generally provide a guaranteed interest rate for a specified period and may provide predictable income payments according to the contract.
Variable annuities allow you to allocate premiums among investment options such as subaccounts. Their value and future payments can fluctuate based on investment performance. Variable annuities are securities and are subject to applicable securities regulations.
Fixed indexed annuities may credit interest based in part on the performance of a specified market index, subject to the terms of the contract. They typically include a minimum interest guarantee, but the credited interest is not the same as the index’s actual return.
Before Choosing an Annuity
Annuities can involve fees, surrender charges, withdrawal restrictions, and tax considerations. Withdrawals may be subject to ordinary income tax and, in some circumstances, an additional federal tax penalty for withdrawals before age 59½.
Before purchasing an annuity, it is important to review the insurer’s financial strength, understand the contract’s fees and surrender provisions, and consider how the product fits your overall financial and retirement objectives.
Explore Your Annuity Options
Choosing an annuity can be complex. Contact MB FINANCIAL & INSURANCE SERVICES to discuss your goals and learn more about annuity options available to you in California.
Annuity guarantees are based on the claims-paying ability of the issuing insurance company. Product features, fees, guarantees, tax treatment, and availability vary by insurer and contract. This information is for general educational purposes and is not tax, legal, or investment advice.