An annuity is a contract between an investor and a life insurance company that allows the investor to put away money for retirement. Annuities can provide a lump sum payment or periodic payments at specified intervals, usually after retirement.
Annuities can be fixed, variable or indexed depending on the level of risk an investor is willing to take. And, they can be qualified or non-qualified for certain tax benefits.
Annuities may be issued in connection with qualified retirement plans or arrangements (qualified annuities) or issued as a non-qualified annuity. All annuities receive tax deferral on the earnings. Qualified annuities receive additional tax advantages as a result of the qualified plan or arrangement for which they are purchased. Purchasing an annuity as an investment vehicle for a qualified retirement plan or arrangement does not provide any additional tax advantage beyond that already available through the qualified plan or arrangement.
Qualified Annuities Include:
Annuities should be considered long-term investments. If you take your money out early, you could be subject to contract charges, income taxes and an additional 10-percent tax. In addition, withdrawals made prior to age 59½ on tax-qualified contracts may be restricted by the IRS or your employer’s plan. You should consult with your tax advisor regarding any tax-favored product.
WBAN-0001 (5/12)