What do the ratings for annuity providers indicate?
Ratings indicate the relative financial strength of insurance companies. The two
largest rating agencies, A.M. Best and Standard & Poor's, use their own
individual criteria to grade insurance providers. Because the federal government
does not guarantee annuity products, prospective buyers should use these ratings
to gauge risk.
How much income can I receive every month with an annuity?
The amount you will receive every month depends on a number of factors: your
age, gender, state of residence, how much money you invest in the annuity and
what different insurance companies are quoting for their particular annuity
products. (Different annuity insurance companies will quote different prices for
the same product with the same features. It is important to compare annuity
Other factors that will determine how much income you receive include the type
of annuity you specify (fixed annuity, variable annuity, tax deferred annuity,
indexed annuity, guaranteed variable annuity, etc...) and the features you apply
to that annuity (asset protection, guaranteed principal protection, etc...)
You can use our Annuity Calculator to estimate the amount of money you will likely
be able to receive from an annuity for a given set of criteria and investment amount.
Can I alter the amount of my cash for annuity payments after purchase?
Once you've purchased your annuity, it's generally not possible to alter or
accelerate payments. You can purchase more income within your plan at a later
date, but you can't elect to lower your payments for a refund of principal.
Are there any age requirements for buying an annuity?
Most plans require that you be younger than 80 years old to purchase an
Is a medical exam required when I purchase an annuity?
No. Medical exams are not usually required to purchase an annuity.
What percentage of my assets should I use to buy an annuity?
That depends on your particular financial situation. We recommend that you speak
with an independent retirement financial planner or other trusted advisor when
you are evaluating an annuity.
Some retirement financial planners recommend that people reserve at least 40
percent of their retirement assets for unforeseen circumstances. Because most
annuities are designed to provide steady income over time, they are not ideally
suited to cover large unplanned expenses.
How are annuities different from life insurance?
Life insurance pays your beneficiaries a substantial cash benefit should you die
during the term of the policy – essentially protecting them against the risk
that you might die prematurely, placing them in financial jeopardy. Benefits
from life insurance policies are designed to replace "lost" income; they usually
provide significantly more than you've paid into the policy.
Annuities are completely different – they are designed to provide you with
guaranteed income during retirement.
If I have an emergency can I terminate the plan?
In most cases, you cannot terminate your annuity once you've signed up. Certain
outstanding circumstances may, however, enable you to cancel and recover some of
If I die prior to recovering my original investment, what will happen to my payments?
Some annuities offer premium protection as a standard feature. With this
feature, you or your beneficiary will continue to receive scheduled periodic
payments until the cumulative payments equal your net investment – even if you
In states where a premium tax is levied on annuities, your net investment is
your premium, less the state premium tax. Some plans also offer an option that
provides for a specified number of guaranteed payments to be made to your
beneficiary in the event of your death. You can elect to opt for higher annuity
payments each month by forgoing these options, but there's no guarantee that you
will recover all or part of your original investment.
What is the minimum investment to purchase an annuity?
Generally, it is recommended that you have at least $30,000 to put toward an
annuity. However, each individual's situation is unique.
Can I buy inflation protection?
Reputable annuity providers offer automatic cost-of-living-adjustment (COLA) as
a standard feature. COLA will protect you against inflation.
Can I do a 1035 exchange on my annuity?
No. Because annuities carry no cash value, performing a 1035 exchange to other
products is not permitted. However, you can use a 1035 exchange to transfer
funds into an annuity.
Can I buy a Lifetime Income Plan with qualified funds?
Yes. Funds from 401(k), 403(b) and other qualified retirement plans can be used
to purchase an annuity. In such a case, you can roll the funds over into the
annuity without forfeiting tax protection.
What is the exclusion ratio, and how does it work?
If you buy an annuity with non-qualified after-tax dollars, the Exclusion Ratio
is the percentage of your lifetime income payments that you will not have to
treat as income (for federal income tax purposes).
Can an annuity cover both myself and my spouse?
You can have your paycheck last for your lifetime alone or until both you and
your spouse die.
Can I specify how my beneficiaries will receive money after I die?
You can set up your annuity so that if you die, your beneficiaries will receive
payments for a particular period of time. Or, if your annuity contract has funds
remaining after you die, your beneficiaries can receive them as a lump sum.
How do I decide how much I want to commit to an annuity?
The larger your initial premium, the larger your paychecks will be. Ideally you
can purchase an annuity that will provide you with enough guaranteed income to
cover your expenses in retirement.