Myths and Truths About Annuities

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Myth: Insurance companies keep your money after you die.
Fact: Income annuities can guarantee that you will continue to be paid as long as you live or as long as you specify. A popular option for income annuities is life income with a guaranteed period that will continue until all of your money has been paid back, often referred to as a guaranteed return of premium: Should you pass away, your beneficiaries are guaranteed to receive all your money when you die — everything you put in plus the interest you’ve earned.1

Myth: Guaranteed income annuities can’t keep up with inflation.
Fact: The smart strategy to keep your guaranteed income rising is to convert additional savings into guaranteed income. And because payout rates generally increase as you age, your savings will buy an increasing amount of income.

Myth: Guaranteed savings annuities don’t provide anything that can’t be obtained using other financial products.
Fact: Guaranteed savings annuities provide a unique blend of features:

  • Guaranteed growth
  • Tax-deferred compounding
  • Lifetime income

Myth: Annuities are sold by salespeople motivated by high commissions.
Fact: This may be true of some annuities. Ask questions about the salesperson’s experience and credentials and why they are recommending an annuity. Carefully consider all options and whether an annuity is suitable for you.

Myth: Annuities are difficult to understand and own.
Fact: Some annuities are complex, but we keep annuities simple and straightforward. Here’s how they actually make your life easier:

  • Tax-deferred compounding for a guaranteed savings annuity can mean an easier income tax return and a lower tax bill.
  • Guaranteed income annuities replace the complex process of creating your own income with the simplicity of a guaranteed retirement “pay-check.”

Myth: Guaranteed savings annuities are only for older or extremely conservative investors.
Fact: Independent of your age, savings annuities can diversify your retirement portfolio, providing a stable component and balance.

Myth: Once you buy an annuity, you can’t move it without paying taxes.
Fact: Federal tax rules allow you to move your annuity without paying taxes through IRA rollovers and 1035 exchanges. However, surrender charges may apply.

Myth: Surrender charges — fees paid by those who cash out of their savings annuities prematurely — only benefit insurance companies.
Fact: Surrender charges help boost the interest rates credited to savings annuities. How? By discouraging premature withdrawals, surrender charges allow annuity providers to take a longer-term approach to investing the assets that back them.

Surrender charges are only paid by those withdrawing money from their annuity prematurely. Most of our contracts allow you to withdraw up to 10% of your balance after the first year without any charge.

Myth: I only need my money to last as long as my life expectancy.
Fact: Half of us will live beyond our life expectancy. Married couples tend to be more concerned because there’s a very substantial chance that at least one spouse will live to age 95.

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