YES. Guaranteed Lifetime Income for you & your spouse, usually with upside potential based on interest rates or some other mechanism. This insurance contract, in effect, protects your lifestyle and eases concerns that market forces or life events will prematurely deplete retirement account values and the income those values might have generated.
An Indexed Annuity has interest rates that are linked to growth in the equity market as measured by an index such as the S&P 500.
a) Declares a current rate of interest for a specified time period. Once the time expires the company will set a new rate which may be higher or lower than the original rate.
b) Guarantees a minimum interest rate of return which is specified in the contract, and at no time may the current or renewal interest rate fall below it.
c) Guarantees the principal.
A variable annuity has two types of accounts:
In a fixed account, principal and interest are guaranteed by the insurance company. Interest rates are usually guaranteed for one year but can be longer.
In a variable account, the annuity owner bears the investment risk. Policy values vary directly with market performance and may result in a loss of principal and prior earnings. Earnings are tied directly to the performance of various underlying investment vehicles which are available within the variable annuity and are selected by the owner. Variable annuities offer a guarantee that in the event of death the beneficiary will receive at least all the premiums paid less any withdrawals made no matter what the value of the account.
This means if the account fund is valued less than the original investment, the beneficiary will receive the original investment.
Withdrawals may be made at any time. However, the withdrawal may be subject to surrender charges and if done before age 59 ½ there will be a 10% IRS penalty. Some contracts allow an annual 10% withdrawal free of surrender charges. The owner may pre-authorize a systematic periodic withdrawal plan. The owner of the contract instructs the company to withdraw a percentage or a level dollar amount from the contract on a monthly, quarterly, semiannual, or annual basis.
As part of the distribution phase, the owner has two options, he or she can withdraw money (either in a lump sum or elect a systematic withdrawal plan) or annuitize (purchase an annuity pay out plan).
When the owner annuitizes the funds he or she purchases an annuity pay out plan. In a Fixed and in an Indexed Annuity the owner purchases a monthly income that will be paid to him or her until death. It is a guaranteed income that will not change. In a variable annuity, the owner has an option to do the same or transfer all or part of the contract to one or more of the sub-accounts that are available, and annuitize those funds. The funds that are annuitized in the separate accounts produce an income that will change from month to month based on the performance of the sub-account that the funds are placed in.
Life Only - Periodic monthly payments to an annuitant for the duration of his or her lifetime and then ceases. It is for a lifetime, the annuitant cannot outlive the payments. The payments are determined at the time of purchase and are based on age and sex.
Life with 10 years certain - Payments will be made for at least ten years, regardless if the annuitant lives for the entire ten years. If the annuitant dies during the ten-year period the remainder of the ten-year payments will be made to a beneficiary. If the annuitant lives longer than ten years he or she will continue to receive payments for his or her lifetime. The guaranteed monthly payments will be less than "life only."
Life with 20 years certain - Payments will be made for at least twenty years, regardless if the annuitant lives for the entire twenty years. If the annuitant dies during the twenty-year period the remainder of the twenty-year payments will be made to a beneficiary. If the annuitant lives longer than twenty years he or she will continue to receive payments for his or her lifetime. The guaranteed monthly payments will be less than "life only", and "Life with 10 years certain."