An annuity is a contract between an individual and an insurance company that allows one to invest money in order to receive regular income payments either immediately or in the future that cannot be outlived. There are two main types of annuities - immediate annuities that begin income payments within 12 months, and deferred annuities that allow accumulating money on a tax-deferred basis before receiving income. Fixed annuities guarantee a specific rate of return while variable annuities have the potential for greater growth through market investments and carry more risk. Annuities provide tax-deferred growth and income, but come with various fees that can reduce returns. Common reasons for purchasing annuities include guaranteed lifetime income, tax-deferred growth

1. Annuities: What are They and Should I Own One?
• A n n u i t y - A Cc^ire^ct^jet^een you and an insurance company. An annuity gives you
an opportunity to invest in order to help supplement your assets with a c^i^ic^nhfJ-^^Ld
stream of income you can't outlive.
• Two types of Annuities
(a) Start taking income sooner rather than later.
(b) Purchased with a single LiA.^yp £ Ury[ payment
(c) Must begin receiving income payments within jX months
(d) You choose the ^^-^^mdi^ f>i-r'iad and payments are calculated
based on the option that you choose
2. TkfrrycLj
(a) Accumulate money on a 4"tx)c - c i g f g ( - y & j basis.
(b) May allow you to delay receiving payments until you're ready to start taking
income for retirement. This may depend on your age and if the money is
"^]Utiilj^J__' or " /J'dfy- fcAg (rffkJ ".
(c) You may take the income as needed, or you can set up a regular stream of
annuity income payments that can last for / i or over a given
(d) You can purchase a deferred annuity by making either a single payment or a
S c? r i of payments. r •
(e) Two main types of deferred annuities: • <• xe" i and Yt^-T I io i « -
• Fixed Annuities
1. Guarantee a specified Y'c^"^<?• i^f y(g4<^y^i for a specified period of time
or for life.
2. Depending on the terms of the contract, the issuing company may adjust the
rate periodically.
3. In general, fixed annuities have /OLO'^Y^ fees than variable annuities and are
considered fgSS volatile.
• Variable Annuities
1. Designed for people willing to take />1 o t ^ risk with their money in
exchange for greater growth potential.
2. Hybrid of an / V v ' ^ j . f/vig*^ "T product and an J f^^o^r-iX-riC-l, product.

2. Two Phases of an Annuity
1. A1 t Cg M (,x, (od'icfy Phase
(a) Starts as soon as you make your initial purchase payment
(b) Consists of a fixed or variable annuity
2. D i£ f Y I b >.v4 i 0 /-J Phase
(a) Starts as soon as you, or you and your spouse, start receiving income
payments, usually at y^e-f • m t ' / ^ l a p4--er- ^tc^e 6'"^ '/^ -
Tax Advantages of an Annuity
1. Tax-deferred growth potential is one of the major advantages of an annuity. You
pay no taxes on your earnings until you take {Oit hcAyyc.^^JJ(J^.ic, .
2. More money stays / A / ^i-^^-f-id that otherwise would have been paid out
in taxes.
3. A Variable Annuity allows you to transfer your money from one S ^ ^ - lCC o u i^"^
to another within the annuity without paying taxes on your income and gains.
That's not the case with taxable investments.
• Costs of Annuites
1. Designed to cover costs of 5 ^ 1 [ j AJ^ administering and providing
benefits under the contract.
2. The most common annuity fees and expenses include Annual maintenance fee.
Mortality and Expense risk charge. Administrative fees. Underlying fund
expenses, ^jA^rytf 7J<^^v^ C kc,-i^e^ and Optional Rider expenses.
The sum total of these fees and charges may range from J_ - ^ % depending
on the type of annuity, riders and optional benefits selected.
• Most Common Optional Benefits
1. ^ i ^ Y t h a j e t-i-e-d
(a) Credit added to your variable annuity contract value based on a specified
percentage (usually 2-6%) of the initial purchase payment. An additional fee
and/or longer surrender charge period may be charged.
2. ^i^k(LfO C ed D g k B&tJ eJ^l-^
(a) For an additional fee this can help you protect your legacy from market
downturns. This is added to the "Basic Death Benefit" offered on most
annuities.
3. J-ij^'t/o^ 3&tJ^fli<^

3. (a) For an additional fee these benefits offer upside market opportunity with
downside protection for you and/or your spouse's retirement income. iVIay
provide you compound growth on the variable annuity's highest account
value at specific intervals, such as on an annual, quarterly or even daily basis.
Also guarantees a minimum level of income payments for life.
• Questions to consider before purchasing an annuity
1. Will the annuity help address your retirement / N CO 1711?, needs?
2. Are you investing in the annuity through a retirement plan or IRA?
3. Are there i^Qc^yJ^<e^ and bg '^^.^rl.s in the annuity contract, other than
tax-deferral, that make an annuity purchase appropriate?
4. Are you familiar with the potential charges and -^c^v-jc^^ associated with an
annuity?
5. Do the enhanced features and optional benefits 0,^}^<i..c^w the additional
fees?
• Most common reasons investors purchase annuities
1- Scx p€."f-*7 ^f^d security of fixed annuities
2. Tax-Deferred growth with "Non-Qualified" money
3. Guaranteed income for life with /' m iwgct iccks annuities
4. lA^ ^jxia. market potential with downside protection with variable annuities
that include a living benefit rider
Duane Home, CLU, ChFC, LUTCF, CFP - Guidance Financial (713)863-9900