Annuities

An annuity is a contract issued by an insurance company. You provide a lump sum or make a series of payments, and in return the annuity can provide growth potential, income, or both. Depending on the type of annuity, income can begin immediately or at a later date.

Common types include fixed annuities, which provide a stated interest rate for a specified period; fixed indexed annuities, which credit interest based in part on the performance of a market index, subject to the contract’s terms; and income annuities, which can convert a lump sum into a stream of payments.

Generally, yes, but access depends on the contract. Many deferred annuities have a surrender period during which withdrawals beyond any contractually permitted amount may be subject to surrender charges. Some withdrawals may also have tax consequences. We’ll review the contract’s access provisions, fees, and potential charges with you before you purchase.

With a deferred annuity, interest and other earnings generally grow tax-deferred until they are withdrawn. Withdrawals of taxable earnings are generally taxed as ordinary income, and withdrawals made before age 59½ may be subject to an additional 10% federal tax penalty, subject to applicable exceptions. Tax treatment can vary based on how the annuity is owned and distributed, so we recommend consulting your tax professional about your specific situation.

Annuity guarantees are backed by the financial strength and claims-paying ability of the insurance company that issues the contract. They are not guaranteed by the FDIC or any other government agency.

No. Annuities are designed for specific purposes, such as creating future or lifetime income, tax-deferred accumulation, or providing a combination of benefits. They also have costs, contractual restrictions, and features that may not be appropriate for every situation. The right question is whether a particular annuity fits your goals, time horizon, and overall financial plan.