Glossary

A

Annuity — An annuity is a contract between you and an issuer whereby you agree to give the issuer principal and in return the issuer guarantees you fixed or variable payments over time. While annuities are not insurance policies, they are issued by insurance companies.

Annuitant — The individual who receives the benefits of an annuity or pension. This can be the person who holds the contract or the person to whom the title was designated.

Annuitization — Annuitization refers to the process of changing your annuity investment into periodic income payments. Annuitization can occur over a set period of time or in one payment.

B

Bonus Annuity — A type of fixed-deferred annuity that offers a bonus during the first year of the contract. This bonus comes in the form of additional principal or additional interest and is usually between 1 and 5 percent.

C

CD Type Annuity — A hybrid annuity combining features of a fixed annuity and a CD. This is a tax-deferred investment without an oppressive fees structure. With a CD Type Annuity, the annuitant can reinvest the money earned through its rate of interest.

D

Death Benefit — Also known as a survivor benefit, a death benefit is the amount of money that will be paid to the beneficiary at the time of the annuitant's death. Depending on the type of annuity contract, this may provide a percentage of the annuitant's monthly income to the beneficiary, or may offer a lump sum payment.

Deferred Annuity — A deferred annuity contract delays payment until the annuitant opts to begin receiving them. Deferred annuities have two phases; the savings phase and the income phase. The earnings on a deferred annuity account are taxed only upon withdrawal. Deferred annuities can be variable or fixed and provide a death benefit, which guarantees that the beneficiary will receive principal and investment earnings.

E

Equity-Indexed Annuity — An equity-indexed annuity is a contract between you and your insurance company. The insurance company credits you with a return that is determined by the S&P 500, or a similar equity index, during the accumulation period. Typically, the insurance company guarantees a minimum return, but these rates vary depending on the company. After the accumulation period, you will receive periodic payments unless you opt for a lump sum payment.

F

Fixed Annuity — With a fixed annuity contract, the insurance company makes fixed payments to the annuitant for the length of the contract term, which is typically until the death of the annuitant. Both principal and interest are guaranteed. They offer a guaranteed rate, typically over a period of one to ten years, and have an average surrender charge that decreases over 7 years, i.e. 7,6,5,4,3,2,1,0%.

Fixed/Equity-Indexed Annuities — A fixed-indexed annuity is a type of annuity that grows at the greater of a) an annual, guaranteed minimum rate of return; or b) the return from a specified stock market index (such as the S&P 500), reduced by certain expenses and formulas.

G

GAV Benefit — Guaranteed Minimum Income Benefits are an option that can be purchased for retirement annuities. This guarantees that, upon annuitization, the annuitant will receive a minimum value in payments, regardless of market conditions. This amount based on an assessment of the investment's future value.

GMIB — Guaranteed Minimum Income Benefits are an option that can be purchased for retirement annuities. This guarantees that, upon annuitization, the annuitant will receive a minimum value in payments, regardless of market conditions. This amount based on an assessment of the investment's future value.

GMWB — Guaranteed Minimum Withdrawal Benefits are an option that can be purchased for retirement annuities. This option gives you the ability to protect your investment against market risk. GMWBs allow the annuitant to withdraw a maximum percentage of their investment every year until the initial amount has been recovered.

I

Immediate Annuity — Immediate annuities guarantee a steady stream of income for a designated period of time. You give the insurance company a large sum of cash in exchange for monthly income for either a set period of years, or for the duration of your life or the life of your spouse. Immediate annuities are often used by those who are already retired, as they begin paying out immediately.

Investment Strategies & Asset Allocation Models — Pre-defined asset allocation models are appropriate for investors who do not want to actively manage their annuity sub-account portfolio, for lack of time, experience or confidence

N

No Load Annuity — No Load Annuities are investments for which the investor is not charged a commission fee and do not have surrender charges. Some insurance companies offer no load variable annuities that can be sold directly to investors and do not require a broker.

No Surrender Annuity — A no surrender annuity is an annuity without penalty charges for early withdrawal. Keep in mind, if you are under 59 1/2 years old, you will still be required to pay a 10 percent federal excise tax in addition to income taxes on gains. Making a 1035 Tax-Free Exchange will allow you to avoid any and all taxes and penalties.

V

Variable Annuity — A variable annuity can be purchased with a single payment or a series of payments. With a variable annuity contract, the insurance company guarantees a minimum payment at the end of the accumulation stage. Depending on the performance of the portfolio, which usually consists of investments in equity securities, the remaining income payments may vary.