What is a Fixed Annuity?
A fixed annuity is a contract with an insurance company that offers a fixed rate of interest. In return for your purchase payment (premium), and if you elect to annuitize, the company makes income payments to you at regular intervals, usually in retirement.1
Usually, fixed annuities are intended to provide retirement income on a long-term basis.
Purchasing a Fixed Annuity
You may either purchase a single-premium fixed annuity or a flexible-premium fixed annuity.
Single-premium fixed annuity. You pay the insurance company only one lump-sum payment (a single payment amount).
Flexible-premium fixed annuity. You make a series of payments—an initial purchase payment (premium) and periodic payments (future additional payments).
The value of your fixed annuity is the sum of the premiums you have paid, less charges and withdrawals, plus the interest credited. This value is used to calculate the amount of most benefits you will receive.
Guarantees are subject to the claims-paying ability of American General Life Insurance Company.
1Annuitize—to start taking the money in the form of regularly scheduled payments.
2 Remember, withdrawals of taxable amounts are taxed as ordinary income and, if taken prior to age 59½, your withdrawal may be subject to a 10% federal early withdrawal penalty. Contractual withdrawal charge fees (surrender charges) may also apply.
Tax-qualified contracts such as IRAs, 401(k)s, etc., are tax deferred regardless of whether or not they are funded with an annuity. If you are considering funding a tax-qualified retirement plan with an annuity, you
should know that an annuity does not provide any additional tax-deferred treatment of earnings beyond the treatment by the tax-qualified retirement plan itself. However, annuities do provide other features and benefits such as income options.
Neither American General Life Insurance Company nor its agents or representatives are authorized to give legal, tax or accounting advice. Please consult your attorney, accountant, or tax advisor on specific points of interest.
The Western National series of annuities is issued and underwritten in New York by The United States Life Insurance Company in the City of New York and in all other states by American General Life Insurance Company.