Annuities

An annuity is a long-term investment that is issued by an insurance company designed to help protect you from the risk of outliving your income. Through annuitization, your purchase payments (what you contribute) are converted into periodic payments that can last for life.

There are a number of different types of annuities, but the most common are variable annuities and fixed annuities. Funds in a variable annuity are typically invested in an investment portfolio and the account value can fluctuate based on the portfolio’s performance. A fixed annuity is typically invested in a fixed account so the principal value is guaranteed. In exchange for the guarantee, the rate of return is typically lower.

What income options are provided by the annuity?

Fixed and variable annuities traditionally offer either immediate income or deferred income. Immediate income begins either right after or shortly after the contract is issued. Deferred income begins at a future date, which allows the account value to grow tax deferred in the meantime.

What fees are associated with the annuity?

Annuities typically charge annual maintenance, insurance, and portfolio fees; certain guarantees offered by variable annuities, such as optional living or death benefits, usually have additional fees. There may also be additional fees depending on the annuity provider.

Are there any early termination (surrender) charges?

If you withdraw money from a variable annuity within a certain time period after each purchase payment (typically seven years or less), the insurance company may assess a surrender charge commonly known as a contingent deferred sales charge (CDSC). Generally, the surrender charge is a percentage assessed on the amount withdrawn in excess of any free withdrawal (usually 10% of purchase payments per year) and declines gradually over a period of years – the surrender period.

What are the annuitization options?

When the time comes to start receiving income from your annuity, you will need to select a payment schedule to meet your needs. These may include payments for life, for a specified period of time (often 10, 20 or 30 years), or for a combination of the two (e.g. life with 10 years).

Are optional benefits available?

Optional living benefits and optional death benefits are available. The suitability of these guarantees depends on your investment needs and financial profile.

What is the withdrawal rate?

As part of a living benefit, the withdrawal rate is the percentage of your total account that you can withdraw each year without penalty or reducing your income benefit. This rate is set at the time of your application and does not change for the life of your benefit. The amount of guaranteed income that you can withdraw each year may grow depending on when payments begin.

What are the opportunities for growth?

Annuities with optional benefits typically provide two opportunities for growth of your retirement income: the roll-up rate, and the opportunity to lock in account highs.

When you purchase optional benefits, the roll-up rate is the guaranteed growth rate of the annuity. It is set at the time your application is signed and does not change for the life of your benefit.

Some optional benefits have lock-ins, which help you capture market gains for your annuity account at a specific point of time. Typically, annuities offer the ability to lock in account highs annually, quarterly, or monthly. Some even offer daily lock-in opportunities, so no matter how the market performs your retirement income can continue to grow each day.


Orlando 401k Specialists provides a full suite of fixed, indexed and variable annuities. We can also appraise an existing annuity to see if it is still current with your needs.

Disclaimer: Guarantees are subject to the claims paying ability and principal strength of the annuity issuer.