Frequently Asked Questions
Is a fixed annuity a good choice for you?
Only you and your financial professional can decide that for sure. But here are a couple of questions that might give you an idea…
- Are you looking for safety of principal?
- Do you worry when the stock market falls?
- Are you comfortable giving up some growth potential for a guaranteed return?
What is a Fixed annuity?
Fixed annuities pay guaranteed rates of interest, which makes them appealing to investors wary of the stock market’s ups and downs. What also makes them appealing is the fact that the interest they pay escapes taxation until you pull it out. They also avoid probate upon death when you name a beneficiary of your choice. Fixed annuities may also provide a lifetime income if you desire.
What do annuities do?
While life insurance provides financial protection against dying too soon, annuities provide financial protection against living too long. They do this by guaranteeing a stream of income for life. Some annuities also use the power of tax deferral — earnings aren’t taxed until they’re withdrawn — so your money can grow faster.
What is a Multi Year Guaranteed Annuity (MYGA)?
An MYGA is a contract with an insurance company that guarantees a specific fixed interest rate on your investment over a set period of time — generally three to ten years. A deferred fixed annuity is particularly geared to investors looking for additional retirement savings at a competitive rate of return without market volatility.
What are some benefits of a Multi Year Guaranteed Annuity (MYGA)?
- Typically offer higher interest rates than Bank CD’s for the same term
- Interest earnings are tax-deferred when compounded (Grow Your Money)
- Can be purchased with both non-qualified as well as tax-qualified IRA funds
- Lifetime income options available (If Desired)
- Principal guaranteed…free from market risk and price fluctuations
- Avoids probate, passing to named beneficiaries at death
- No fees, loads or sales charges
- Provides a fixed rate so you can have both safety and predictability.
Who may benefit most from a deferred fixed annuity?
A deferred fixed annuity is often best suited to investors who are interested in a tax-deferred fixed rate of return over a set period of time, are at or near retirement, are subject to high federal or state income tax rates or will likely utilize the funds after age 59 ½.
How can I fund my Annuity?
- Replace a fixed investment such as a maturing bond, CD, or stable value fund
- Use money from a retirement account [401(k), IRA] via a transfer of assets; a tax-free event
- Use current savings, bonus, inheritance, etc.
- Exchange an existing annuity to a deferred fixed annuity tax free with a 1035 Exchange7
What Happens to the Annuity Assets if you die?
If you die, assets (including earned interest) from your Annuity go to your designated beneficiary or beneficiaries. Your beneficiaries can generally choose to receive their portion of the balance in a lump sum or as an income stream. If your spouse is the beneficiary, he or she may elect to simply assume ownership of the contract.
What fees are associated with an annuity?
Fixed annuities have fees for early withdrawals over a certain amount (generally you can withdraw 10% per year with no fee). These fees, known as surrender charges, help discourage premature withdrawals. This results in a more stable investment portfolio for the issuing insurance company and higher interest rates. Fixed annuities do not charge a fee on initial purchase.
Some Fixed annuities may have a nominal annual administration fee. It is generally waived if your balance is above a certain amount. Other types of annuities such as Variable annuities do have fees in addition to the surrender charges.
Can I transfer my IRA into an Annuity?
There are many investment options in which you can transfer your IRA, Annuities are certainly one of them.
Can I transfer my existing Annuity into a new Annuity without having to pay taxes?
Yes, if the annuity is still in the accumulation phase. The IRS allows a few different ways for you to transfer your money from one annuity to another without paying taxes. Remember, that although the IRS allows tax free transfers, your current company may charge surrender fees. You should always check your contract before transferring from one annuity to another
Can I withdraw the interest earned every year to help provide income?
It depends on the insurance carrier, but generally the answer is yes. Withdrawals from your annuity are taxable and withdrawals prior to age 59 ½ could be subject to additional IRS penalties. Always consult with your advisor to understand what taxes and penalties may apply.
Where can I read more about my state's coverage?
If you want to learn more about the coverage offered in your state, click your state’s link below (which opens into a new tab or window) or call the phone number listed for your state’s fund.
|State Guaranty Associations|
|State||Web Site||Phone Number|
|Dist. of Col.||dclifega.org||(202) 434-8771|
|New Hampshire||nhlifega.org||(603) 472-3734|
|New Jersey||njlifega.org||(732) 345-5200|
|New Mexico||nmlifega.org||(505) 820-7355|
|No. Carolina||nclifega.org||(877) 833-6831|
|North Dakota||ndlifega.org||(701) 235-4108|
|Rhode Island||rilifega.org||(401) 273-2921|
|So. Carolina||sclifega.org||(803) 276-0271|
|South Dakota||sdlifega.org||(605) 336-0177|
|West Virginia||wvlifega.org||(304) 733-6904|