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What is an Annuity?

 

An annuity is a contract between you and an insurance company.  Annuities are most often purchased with income for the future in mind.  There are two types of annuities – variable and fixed.  Variable annuities tie growth to certain securities.  Fixed annuities provide growth through declared interest rates or by linking interest growth to a market index.  Fixed annuities have many benefits, including:

 

  • Ability to meet long-term financial goals, such as retirement
  • Guaranteed income for a specified period of time or even for life
  • Tax-deferred growth
  • Protection from market loss
  • Avoidance of probate

 

In return for a premium you pay, an insurance company will make a single payment or a series of income payments either immediately or at some time in the future. 

 

Annuities have two phases – a deferral phase and an income phase

 

  • Deferral Phase: the time period between the inception of the contract and the date of the first distribution in which values accumulate on a tax-deferred basis
  • Income Phase:  the period of time in which income is withdrawn from the contract, which may be for a specified period of time or for your lifetime

 

Who can sell annuities?
Annuities can only be sold by licensed insurance professionals who completed product specific training.  The agent must be a representative of the insurance company and must hold a valid insurance license in your state.  Agents and representatives are compensated by the insurance company.  No sales compensation is ever deducted from your annuity principal.


 

What is the tax treatment on annuities?
Under current federal law, annuities receive special tax treatment.  Income tax on annuities is deferred, which means you are not taxed on the interest your money earns while it stays in the annuity.  Earnings are taxable as ordinary income when distributed; and if withdrawn before you turn 59 ½, a 10% tax penalty may be enforced.   Neither American Equity nor any of its agents or representatives are authorized to give tax advice.  You should consult a professional tax advisor to discuss your individual tax situation.

 


American Equity offers three types of annuities:


 

Traditional Fixed Annuity
A traditional fixed annuity is a contract between you and American Equity.  Your fixed annuity includes:

  • A competitive interest rate declared by American Equity is guaranteed for a specified period of time
  • A guaranteed minimum interest rate over the term of the contract
  • The interest rate cannot drop below the guaranteed minimum rate established at the beginning of the contract

 

Benefits and Features of Our Traditional Fixed Annuity:

  • Tax-deferred growth
    • Taxes are not owed on earned interest until a withdrawal is made from the contract
  • Competitive current and renewal interest rates
  • Systematic withdrawals of interest or amounts to satisfy the IRS minimum distributions are accessible immediately*
  • Penalty-free withdrawals are available
  • Additional liquidity may be available if the annuitant is placed in a nursing home or diagnosed with a terminal illness (varies by state, product and issue age)

Fixed Indexed Annuity
A fixed indexed annuity is a contract between you and American Equity where the potential interest earned is linked to an external equity or bond index.  The S&P 500® Index, the Dow Jones Industrial Average® Index and the 10 Year US Treasury Bond are the most commonly used indexes.  In a fixed indexed annuity:

  • The values of an index can vary daily and certainly are not predictable
  • Your contract is backed by American Equity
  • You are not purchasing shares of stock, bonds or any indexes

 

Benefits and Features of Our Fixed Indexed Annuity:

  • Tax-deferred growth
    • Taxes are not owed on earned interest until a withdrawal is made from the contract
  • Ability to choose how interest is calculated and which index is used
  • Systematic withdrawals of interest or amounts to satisfy IRS minimum distributions available immediately*
  • 10% penalty-free withdrawals after the first contract year
  • Each annuity contract gives you access to some of your money without a penalty after the first contract year
  • Lifetime Income Benefit**
    • The Lifetime Income Benefit Rider allows you to take a guaranteed lifetime income from your annuity without losing control of your retirement assets
  • Additional liquidity may be available if the annuitant is placed in a nursing home or diagnosed with a terminal illness (varies by state, product and issue age)
  • Surrender charges may apply for early withdrawal
     
Lifetime Income Annuity
A lifetime income annuity is a contract between you and American Equity in which you pay a single premium and income payments start no later than 12 months after issue.  The income payments are guaranteed for a specified period of time or for the rest of your life.
 
In American Equity's lifetime income annuity:
  • Income is guaranteed to not decrease regardless of external interest rate fluctuation
  • A variety of income options and payout modes are available to meet your individual needs
  • Once the annuity is issued, payments begin as specified and cannot be changed or stopped
     

What’s next?

American Equity is committed to providing a variety of fixed and indexed retirement products.  Our annuities are designed to provide you with flexibility of wealth accumulation opportunities, income choices and safety.  We understand that one product will not fit everyone’s individual financial needs.  We encourage you to talk to one of American Equity’s qualified, independent agents about customizing the right product for your future.  Call 888-647-1371 to be connected with an American Equity agent!


 

*Benefit not guaranteed and subject to change
**Not available on all products
Features and benefits may vary by product and state.  Please review the contract or product disclosure for more information.
 
Annuities are products of the insurance industry and are not guaranteed by any bank or insured by the FDIC.
 
The "S&P® and/or Dow Jones®" is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by American Equity Investment Life Insurance Company®.  Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); Standard & Poor’s®, S&P® and/or Dow Jones® are trademarks of the SPDJI; and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by American Equity Investment Life Insurance Company®.  American Equity Investment Life Insurance Company's® [Product(s)] is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P and/or Dow Jones.
 
Tax Interpretations:  Neither American Equity Investment Life Insurance Company® nor any of its agents or representatives give tax, legal or investment advice.  Consult a qualified advisor.