Variable Annuities
What is a Variable Annuity?
A variable annuity is a long-term contact between you as the investor and the insurance company which combines investment and protection into a single financial products to help address your needs. They are designed with a goal to help provide you with retirement income.
There are generally two types of variable annuities: qualified and non-qualified. If a variable annuity is purchased through an IR or other qualified plan it will not provide any additional tax advantages (other than the advantages which that plan already provides). Non qualified annuities avoid income tax fees until distributions are made.
Purchases and Withdrawals
Withdrawals will first come from any contract gains and may reduce the death benefit, optional benefits or contact value. Taxable distributions are subject to ordinary income tax and may be subject to a federal income tax penalty if made prior to 59 1/2 years of age. Certain qualified plans may require distributions to begin by age 70 1/2.
Variable annuities are long term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They have fees and charges, including mortality and expense risk charges, administrative fees, and contract fees. They are sold only by prospectus. Guarantees are based on the claims paying ability of the issuer. Withdrawals made prior to age 59 ½ are subject to 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value. Early withdrawals have the effect of reducing the death benefit and cash surrender value. For more information, or to request a prospectus, contact your investment representative or the insurance company.
