A note about annuities
All annuity contracts have fees and expenses, limitations, exclusions, holding periods, termination provisions, and terms for keeping the annuity in force. Annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. Variable annuities in particular are
suitable for retirement
funding and are subject
to market fluctuations
and investment risk,
including the possibility
of loss of principal.
Variable annuities are
sold by prospectus,
information about the
including a description
of applicable fees and
charges. These include,
but are not limited to,
mortality and expense
administrative fees, sales and surrender (early withdrawal) charges, and
charges for optional
benefits and riders. The
prospectus can be
obtained from the
offering the variable
annuity or from your
Read it carefully and consider the risks and objectives carefully before investing.
annuity riders, are
subject to the
ability and financial strength of the annuity
prior to age 59½
may be subject to a
10% federal tax
penalty on the taxable portion of the withdrawal.
Common Annuity Riders
An annuity is a contract between you (the purchaser or
owner) and the issuer (an insurance company). In its simplest form, you pay
money to the annuity issuer, the issuer invests the money for you, and then the
issuer pays out the principal and earnings back to you or to a named
An immediate annuity is a contract between you and an
insurance company in which you pay a single sum of money to the company in
exchange for its promise to make payments to you for a fixed period of time or
for the rest of your life.
Annuity riders are optional features that provide added
benefits to a basic annuity contract. For example, some riders focus on
offering greater access to the annuity's principal, or providing long-term
Annuity riders usually come with an annual cost, generally
ranging from.1% to 1.0% or more of the annuity's value. Review the annuity sales
materials and prospectus for a description of applicable fees and charges. The
availability of a specific annuity rider usually depends on the annuity issuer
and the type of annuity you are considering.
Cost-of-living adjustment rider
The cost-of-living adjustment rider, available on some
immediate annuities, increases immediate annuity payments by a stated annual
percentage to offset the effects of inflation. However, due to the added cost
of this rider to the issuer, the first few payments from an annuity with this
rider are typically less than they would be without the rider. It usually takes
several years before cost-of-living immediate annuity payments equal or exceed
immediate annuity payments without this rider.
Cash/installment refund rider
Available on some immediate annuities, the cash refund rider
provides that if the total of all immediate annuity payments received by the
time of your death is less than the investment (the premium) you paid into the
immediate annuity, the difference is paid in a lump sum to your annuity
beneficiary. The installment refund rider is similar to the cash refund rider,
except that your beneficiary receives the balance of the immediate annuity
premium in installment payments instead of a lump sum.
Impaired risk (medically underwritten) rider
This rider may be added to an immediate annuity. Ordinarily,
an insurance company bases the amount of immediate annuity payments on the
amount of premium you pay, your age at the time payments begin, and how long
you are expected to live if payments are to be made for the rest of your life.
If you have a medical condition that reduces your life expectancy, the impaired
risk rider bases your annuity payments on your shortened life expectancy. This
results in payments being greater than they would be for a person in good
health, or the payments can be the same but for a smaller premium.
Commuted payout rider
This immediate annuity rider allows you to withdraw a
lump-sum amount from your immediate annuity in addition to the regular payments
you are receiving. Usually, this option is available for a limited period of
time, and may be limited to a maximum dollar amount or a maximum percentage of
Guaranteed minimum accumulation benefit rider (GMAB)
The GMAB rider, available with some variable annuities,
restores your annuity's accumulation value to the amount of your total premiums
paid if, after a prescribed number of years (usually 5 to 10), the annuity's
accumulation value is less than the premiums you paid (excluding your
withdrawals). Some issuers offer this rider with the ability to lock in any
gains in the accumulation value. Thereafter, your guaranteed minimum
accumulation value will equal your total premiums paid, plus locked-in gains,
Guaranteed minimum withdrawal benefit rider (GMWB)
The GMWB rider provides you with a minimum income by
allowing you to take withdrawals from your annuity up to an amount at least
equal to the premiums you paid. Annual withdrawals are usually limited to a
percentage of the total premiums paid (5% to 12% per year). Both the GMAB rider
and the GMWB rider provide you with the opportunity to secure the return of
your investment (the premium) in the annuity, even if the annuity's
accumulation value decreases due to poor subaccount performance.
Guaranteed minimum income benefit rider (GMIB)
The GMIB rider, included with some variable annuities,
offers a minimum income regardless of your actual accumulation value. The
annuity issuer adds a growth rate to your premiums (usually 5% to 7% per year)
that becomes your guaranteed minimum account value. After a minimum number of
years (often 5 to 10), the rider allows you to convert the variable annuity to
an immediate annuity and receive payments based on the greater of the minimum
account value or the annuity's accumulation value.
Guaranteed lifetime withdrawal benefit rider (GLWB)
The GLWB rider may be added to some annuity contracts. It allows you to receive an annual income for the
rest of your life without having to convert to an immediate annuity. And you
can usually access the remaining accumulation value in addition to the income
payments received. Income payments and withdrawals are subtracted from the
annuity's cash value.
Long-term care rider
The long-term care rider is available with many fixed
deferred annuities. If you become confined to a nursing home, or are unable to
take care of yourself, this rider allows you to access more of your annuity's
accumulation value, possibly up to 100%, without the imposition of surrender
charges or distribution costs otherwise applicable.
These riders are offered with fixed and variable annuities.
If you become disabled for an extended period of time (usually from 60 days to
1 year), or if you are unemployed for a similar length of time and are eligible
for unemployment benefits, these riders allow you to access a portion or all of
your annuity's accumulation value without the imposition of surrender charges.
Terminal illness rider
This rider, available with both fixed and variable
annuities, waives surrender charges otherwise applicable for a portion or all
of your annuity's accumulation value if you suffer from a terminal illness with
a medical life expectancy of one year or less.