Annuities

Annuities

Annuities can be a key part of your financial strategy by helping you before and after you retire, providing tax-differed growth as you save and income during retirement.

Fixed annuities

Fixed annuities are contracts between insurance companies and investors. Fixed annuities are very similar to Guaranteed Investment Certificates (GICs), with investment options and terms that range from daily interest accounts to guaranteed terms up to 10 years.

This type of annuity is an investment alternative if you are seeking growth of principal and interest for purposes such as retirement planning.

Fixed annuities features:

• Guaranteed interest rate – Fixed annuities offer a fixed rate of interest guaranteed by the issuer.
• Guarantee of interest and principal – The payment of both interest and principal is guaranteed by the insurance company.
• Guaranteed interest income option – Interest is paid out monthly, quarterly, semi-annually or annually.
• Penalty for early withdrawal – There may be a market value adjustment charge if withdrawals occur before term maturity.
• Penalty for early surrender – You are assessed a market value adjustment charge if you redeem your investment prior to term maturity.
• Avoid probate – Upon death, proceeds are paid directly to named beneficiaries – thus avoiding probate and other estate settlement costs.

Variable annuities (Segregated funds)

Variable annuities (also known as segregated funds) are contracts between insurance companies and investors. They work similarly to mutual funds and have added features that insure and guarantee deposits at maturity and death.

This type of annuity is suited for you if you are interested in long-term growth for purposes like retirement planning. If you are self-employed or mature in age, segregated funds are also suited for you because of potential creditor protection and estate-strategy advantages.

Segregated funds features:

• Separate account – Segregated funds are not part of the general assets of the insurance companies. These are in separate client name accounts belonging to policyholders.
• Diversification – Segregated funds allow you to invest into professionally managed sub-accounts that best suit your investment needs.
• Guaranteed death benefit – Upon death, the beneficiary is guaranteed the amount originally invested, minus proportionate withdrawals. Some age limits may apply.
• Liquidity – Most segregated funds allow you to withdraw up to 10% of the segregated fund's value (up to 20% for retirement income plans) without penalty.
• Privacy – Upon death, proceeds are paid directly to named beneficiaries – thereby avoiding probate and other estate settlement costs.
• Penalties for early withdrawal – When purchased on a deferred sales charge basis, there is a redemption fee that may apply.
• Market value fluctuation – The value of a segregated fund is subject to market value fluctuations.

Life annuities

Life annuities are contracts between insurance companies and investors. They can provide you and/or your spouse with a guaranteed income for life, no matter how long you live.

This type of annuity is suited for you if you are a conservative investor seeking the highest possible after-tax income. A life annuity can provide you with a guaranteed maximum monthly income and/or certainty that you will not outlive your capital.

Life annuities features:

• Regular income – Can be paid monthly, quarterly, semi-annually or annually. You'll know exactly how much income you'll receive and how long it'll last.
• Life income – Immediate life annuities can be structured to provide income that cannot be outlived.
• Liquidity – An immediate annuity cannot be altered or ceased. The payments must be continued as the contract originally stipulated until the insurance company has met all its obligations and the policy is terminated.
• Guaranteed period – You can add a guaranteed period so income payments will continue to beneficiaries if death occurs prior to the end of the guaranteed period you select.
• Inflation – You can add an inflation rider so income payments will adjust to inflation.

Term certain annuities

Term certain annuities are contracts between insurance companies and investors. You provide the insurance company with a lump sum of money and, in return, the insurance company guarantees to pay you a specified amount of money for a specified period of time.

This type of annuity is suited for you if you are a conservative, income-oriented investor seeking maximum monthly guaranteed income over a certain period of time.

Term certain annuities features:

• Regular income – Can be paid monthly, quarterly, semi-annually or annually. You'll know exactly how much income you'll receive and how long it'll last.
• Income period – Term certain annuities can only provide income for a certain and predetermined period of time.
• Liquidity – A term certain annuity cannot be altered or ceased. The payments must be continued as the contract originally stipulated until the insurance company has met all its obligations and the policy is terminated.

How we can help

At Edward Jones, we can help you reach your financial goals. Contact your Edward Jones financial advisor.