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Getting Started with Annuities
Annuities

Getting Started with Annuities

August 1, 2023No Comments

Retirement is a relatively new reality. Previous generations didn’t often plan to live 20–30 years without a paycheck.

Today we do.

Annuities can be designed to help clients pursue financial security and address retirement planning needs, including:

icon-relaxingHaving enough money for a lifetime

icon-heart-healthPaying for rising healthcare and living costs

icon-incomeSupplementing income from Social Security and pensions

What Is an Annuity?

An annuity is a long-term, tax-deferred investment issued by an insurance company that can be tailored to meet unique needs. It has two distinct phases:

icon-stay-investedAccumulation Phase

icon-distribution-stackDistribution Phase

An investor funds an annuity with a lump sum or a series of payments, which grows tax-deferred with the power of triple compounding:

1. The principal earns interest.

2. That interest earns interest.

3. The money you would have otherwise paid in taxes earns interest.

There are several types of annuities to choose from—all of which offer different levels of upside potential and downside protection.

Every annuity can be turned into a stream of lifetime income—with taxes due when withdrawals are made—either by:

1. Annuitization, where the account value is converted into a series of periodic income payments;

OR

2. Adding an income benefit to your annuity contract, usually for a fee, which allows you to take systematic withdrawals for life regardless of the account value.

Annuities are increasingly flexible in addressing a variety of retirement goals. Of course, with increased flexibility comes increased complexity.

Investors should carefully review an annuity contract’s offering document, disclosure document, and buyer’s guide for contract details, including risks, fees, and charges. This helps ensure that the annuity aligns with their needs and goals.

Choices

choices-depicted

Fixed Annuities

  • A guaranteed annual rate of return.
  • Full principal protection.

Fixed Indexed Annuities (FIA)

  • More growth potential than fixed annuities.
  • Returns based on the performance of an index.
  • Full principal protection.

Structured Annuities

  • Typically offer greater upside potential than FIAs.
  • Returns based on the performance of an index.
  • Partial protection against market losses.

Variable Annuities

  • Participation in an underlying portfolio of selected funds.
  • Subject to full market risk.
  Fixed annuity Fixed indexed annuity Structured annuity Variable annuity
Tax-deferred growth icon-dot-01 icon-dot-02 icon-dot-03 icon-dot-04
Protection against market losses Full Full Partial
Guaranteed interest rate icon-dot-01
Uncapped growth potential icon-dot-04
Upside based on an index/indices icon-dot-02 icon-dot-03
Upside based on investment funds (e.g., mutual funds) icon-dot-04

This overview is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material does not reflect a specific annuity contract and no person should consider investing in an instrument on the basis of this overview. Actual annuity contracts may differ materially from the general overview provided.

  Fixed annuity
Tax-deferred growth icon-dot-01
Protection against market losses Full
Guaranteed interest rate icon-dot-01
Uncapped growth potential
Upside based on an index/indeces
Upside based on investment funds (e.g., mutual funds)

This overview is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material does not reflect a specific annuity contract and no person should consider investing in an instrument on the basis of this overview. Actual annuity contracts may differ materially from the general overview provided.

  Fixed indexed annuity
Tax-deferred growth icon-dot-02
Protection against market losses Full
Guaranteed interest rate
Uncapped growth potential
Upside based on an index/indices icon-dot-02
Upside based on investment funds (e.g., mutual funds)

This overview is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material does not reflect a specific annuity contract and no person should consider investing in an instrument on the basis of this overview. Actual annuity contracts may differ materially from the general overview provided.

  Structured annuity
Tax-deferred growth icon-dot-03
Protection against market losses Partial
Guaranteed interest rate
Uncapped growth potential
Upside based on an index/indices icon-dot-03
Upside based on investment funds (e.g., mutual funds)

This overview is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material does not reflect a specific annuity contract and no person should consider investing in an instrument on the basis of this overview. Actual annuity contracts may differ materially from the general overview provided.

  Variable annuity
Tax-deferred growth icon-dot-04
Protection against market losses
Guaranteed interest rate
Uncapped growth potential icon-dot-04
Upside based on an index/indices
Upside based on investment funds (e.g., mutual funds) icon-dot-04

This overview is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material does not reflect a specific annuity contract and no person should consider investing in an instrument on the basis of this overview. Actual annuity contracts may differ materially from the general overview provided.

With any annuity, there are key benefits and considerations, such as:

icon-plus-add

Optional Features and Add-Ons

Optional features may be useful to add to an annuity contract, but are also potentially subject to fees, requirements, and other limitations. Examples include:

  • Guaranteed lifetime withdrawal benefit – A benefit that is designed to generate a specific level of guaranteed lifetime income without annuitizing.
  • Death benefit – A benefit that is designed to generate a payment to a designated beneficiary in the event of the annuitant’s death prior to the annuitization date.

icon-contract-guaranteed

Contract Guarantees

Annuities are not FDIC insured.* All references to guarantees arising under the annuity contract, including optional benefits, are subject to the claims-paying ability of the carrier.

With structured and variable annuities, principal is subject to market risk, which may be significant.

icon-percentage-change

Charges and Fees

Early withdrawals or surrender during the surrender charge period may trigger surrender charges, fees, or tax penalties, and may be subject to negative adjustments, which can reduce the account value or the actual withdrawal amount. For this reason, an investor should be prepared and able to hold an annuity through the full length of the surrender charge period.

Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 591⁄2, may be subject to an additional 10% federal income tax penalty.

Why now?

Annuities offer choice and personalization that may help in forging a path towards financial security in retirement. They can provide:

icon-growth-plant-handTax-deferred growth

icon-protection-handsOptions to protect principal*

icon-open-hand-with-coinGuaranteed income

icon-protection-heirsDeath benefit protection for heirs

icon-strategyTax-efficient legacy planning

Annuities and insurance services provided by SIMON Annuities and Insurance Services LLC, an affiliate of iCapital, Inc. Structured investment and certain annuities products and services may be offered through SIMON Markets LLC (“SIMON”). SIMON is a registered broker/dealer, member FINRA and SIPC, and is affiliated with iCapital, Inc. and its subsidiaries. Please see the disclaimer at the end of this document for more information about these entities.

Please contact your financial professional to learn more.

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ENDNOTES

*Variable annuities are subject to market risk and do not provide any form of principal protection. All guarantees and protections are subject to the claims-paying ability of the issuing insurance company.

IMPORTANT INFORMATION — DISCLAIMER

ANNUITIES ARE CONSIDERED COMPLEX PRODUCTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS.

This is not intended to be an offer or solicitation to purchase or sell any security or to employ a specific investment strategy.This material is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material is being provided for informational purposes only and does not take into account any specific investment objectives or financial situation of any investor. The information is not intended as investment advice and is not a recommendation about managing or investing retirement savings. Actual annuity contracts may differ materially from the general overview provided.

Prior to making any decision with respect to an annuity contract, purchasers must review, as applicable, the offering document, the disclosure document, and the buyer’s guide which contain detailed and additional information about the annuity. Any annuity contract is subject in its entirety is to the terms and conditions imposed by the carrier under the contract. Withdrawals or surrenders may be subject to surrender charges, and/or market value adjustments, which can reduce the owner’s contract value or the actual withdrawal amount received. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 591⁄2, may be subject to an additional 10% federal income tax penalty. Annuities are not FDIC-insured. All references to guarantees arising under an annuity contract are subject to the financial strength and claims-paying ability of the carrier. This does not constitute legal, accounting or tax advice, and the recipient should consult with his or her legal, accounting or tax adviser regarding the instruments described in this material.

This material may not, without the prior written consent of iCapital, Inc. or an iCapital, Inc. subsidiary, be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient. iCapital, Inc. and its subsidiaries shall have no liability, contingent or otherwise, to the user or to third parties, for the quality, accuracy, timeliness, continued availability, or completeness or to update any data contained in this material nor for any special, indirect, incidental or consequential damages which may be incurred or experienced because of the use of the data made available herein, even if iCapital, Inc. or any of its subsidiaries has been advised of the possibility of such damages. This material was not prepared with a view to public disclosure or to conform with any disclosure standards under any state, federal or international securities laws or other laws, rules or regulations, and iCapital, Inc. and its subsidiaries do not take any responsibility for the use of the information in this material.

Annuities and insurance services provided by SIMON Annuities and Insurance Services LLC, an affiliate of iCapital, Inc. Structured investment and certain annuities products and services may be offered through SIMON Markets LLC. Alternative investment products and services may be offered through iCapital Securities, LLC. iCapital Securities LLC and SIMON Markets LLC are each a registered broker/ dealer, member FINRA and SIPC, and an affiliate of Institutional Capital Network, Inc. (“iCapital”). These registrations and memberships in no way imply that the SEC, FINRA, or SIPC have endorsed the entities, products or services discussed herein. iCapital and iCapital Network are registered trademarks of Institutional Capital Network, Inc.

© 2023 SIMON Markets LLC. All rights reserved.
© 2023 Institutional Capital Network, Inc. All Rights Reserved.

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