When You Receive Income is Up to You
When considering a fixed annuity, determine when you want to receive income from your contract.
An immediate fixed annuity provides income payments that start shortly after you pay the premium.
A deferred fixed annuity allows you to build your account value over time and convert it to income in the future.
Deferred Fixed Annuities: Two Phases—the Build-up Phase and the Payout Phase
Build-up Phase During the build-up phase (the time between when you start paying premium(s) and when income payments start), the interest in your annuity will compound on a tax-deferred basis.1
Payout Phase (Annuitization)2 There are multiple payout options. You decide which option best suits you.
Fixed Annuity Income Options
The most commonly available fixed annuity income options are:
Life income. This option allows the annuitant (that is, the person who is entitled to receive benefits from the annuity) to receive income for life; when the annuitant dies, the payments end.
Life income with period certain. This option provides for payments over the lifetime of the annuitant or a set number of years, whichever is longer. If the annuitant dies before the “period certain” ends, the remaining assets are paid to beneficiaries, as scheduled.
Period certain only. This option provides for payments to be made for a specific time, usually five to 20 years.
Joint and survivor income. This option provides payments as long as either of the annuitants is alive.
Most fixed annuity contracts provide that, if you die before the annuity payments start, the contract value will be paid to your beneficiary. Some contracts provide that the death benefit will be the total premiums paid if that amount is greater than the value of the contract at death.
Terminating the Contract (surrender benefit)
Most fixed annuities allow you to terminate (surrender) your contract if income payments have not yet started. This is referred to as the surrender benefit, which is equal to your contract value less previous withdrawals and applicable withdrawal charges, if any.
Making Withdrawals—Without Terminating the Contract
Many fixed annuities allow for free withdrawals up to a specific amount—without terminating the annuity.
Keep in mind, contractual early withdrawal charge fees can reduce the value of your fixed annuity.
Guarantees are subject to the claims-paying ability of American General Life Insurance Company.
1 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.2 Annuitization required (the process of converting the fixed annuity into a series of periodic income payments).
2 Annuitization required (the process of converting the fixed annuity into a series of periodic income payments).
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.