Insured Retirement Income Solutions
Use annuities to add stability to your retirement savings.
It’s all in the contract
An annuity is a contract with an insurance company. You pay the company a lump sum or a series of payments, and in return, they agree to pay you income for a predetermined number of years or for the rest of your life. Your income can begin on some future date or it can start immediately. Income can be paid monthly, quarterly, or annually. Often the terms can be customized to fit your needs.
The amount of income generated depends on many factors, including the premiums you pay, the number of years you will receive payments and whether your payments are a fixed amount or variable and tied to market performance. Some annuities accept contributions from pre-tax money, while others accept contributions from after-tax money. If contributing to an after-tax annuity, typically there is no limit on the amount you can contribute.
Annuities offer the potential for tax-deferred earnings growth and in some cases a guaranteed death benefit that pays your beneficiary a specified amount. You will pay taxes at your regular income tax rate on gains you withdraw from an annuity. If you withdraw your money prior to age 59 ½, you may have to pay a 10 percent early withdrawal penalty.
Annuities typically charge several types of charges and fees, including:
Common annuity charges
- Commissions — Paid to the broker or insurance agent who sells the product
- Surrender charges — Fee charged by the insurance company if you take your money out within the first few years. The length of the charge should be indicated at the time the contract is issued. If a contract has a higher mortality and expense charge some contracts have no surrender charge.
- Annual contract fee — Includes annual insurance charges, this is typically waived for larger contract balances.
Less common annuity charges
- Mortality and expense — This fee is charged by the insurance company to cover the payment to beneficiaries when death occurs and to cover expenses of customers taking a guaranteed income.
- Subaccount fee — Fee charged to the insurance company by the fund company to manage the investments inside the annuity. This fee is only relevant when the performance of the annuity is based on market performance, such as a variable annuity.
In this section, we’ll introduce you to four different types of annuities and explain the differences between them. You’ll discover the various features that are available, including fixed and variable payments, death benefits, income guarantees and tax-deferred growth opportunities, among others.
Plan with us
ING Financial Partners offers a full suite of annuity products, including some hybrids that give you the flexibility to combine features from several different types in a single product. Many people see annuities can be complex, but we can help you understand terms, fees and expenses, and how annuities may fit into your retirement planning. If you’d like to learn more, call us today.
IRAs and other qualified plans already provide tax-deferral like that provided by an annuity. Additional features and benefits, such as contract guarantees, death benefits and the ability to receive a lifetime income are contained within the annuity for a cost. Please be sure the features other than tax deferral and costs of the annuity are right for you when considering the purchase of the annuity for IRAs or other qualified plans.
Guarantees, such as guaranteed income benefits, associated with annuities are subject to the claims-paying ability of the issuer.
Subject to state availability, not all products are available in every state.
Variable annuities are long-term investments designed for retirement purposes. A 10% federal penalty may apply for withdrawals prior to age 59 ½. Money distributed from the annuity will be taxed as ordinary income in the year the money is received. Variable annuity subaccounts fluctuate with market conditions, and when surrendered, the principal may be worth more or less than the original amount invested. An annuity is not necessary for the plan’s favorable tax treatment, but offers other features which may be valuable to you. Annuities are subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject.