Immediate Annuity
An immediate annuity is generally funded with a single purchase payment and is designed to begin income payments within a relatively short period after purchase.
Annuities
Turn retirement planning into an income strategy.
Annuities are insurance contracts designed for accumulation, future income or both, depending on the type of contract selected and its stated terms.
Retirement Income
Insurance contracts designed
around accumulation and income choices.
01
Immediate
Income begins relatively soon
02
Deferred
Income begins later
03
Fixed
Contract-based interest provisions
04
Indexed
Index-linked crediting methods
Understanding Annuities
An insurance contract with more than one possible purpose.
An annuity is a contract with an insurance company. Depending on the product, it may be used to accumulate contract value, create future income or begin receiving income relatively soon.
Annuity contracts can differ considerably in guarantees, interest-crediting methods, income choices, liquidity, charges and other provisions.
Annuity Types
Annuities can be grouped in more than one way.
One distinction is when income begins. Another is how contract value and credited interest are determined.
Deferred Annuity
A deferred annuity is designed so income begins at a future date. The contract may have an accumulation period first.
Fixed Annuity
Fixed annuities use interest-crediting provisions and guarantees stated in the insurance contract, subject to insurer terms.
Indexed Annuity
Indexed annuities use a formula linked to an external reference index to determine certain credited interest.
Variable Annuity
Variable annuities allow value to be allocated among investment choices. Contract value can rise or fall with those investments.
Product-Specific Features
Income riders, withdrawal provisions, death benefits and other contract features vary by insurer and product.
Contract Timeline
Some annuities accumulate first
and distribute income later.
Two Different Phases
Accumulation and income serve different purposes.
Deferred annuities may have an accumulation phase followed by an income phase or another distribution method allowed by the contract.
01
Accumulation
Money remains inside the contract while value is determined under the annuity's terms.
02
Distribution
Contract owners may later take permitted withdrawals or use an available income method.
03
Annuitization
Certain contracts allow value to be converted into a stream of annuity payments.
Income Timing
When do you want income to begin?
Income timing is one of the first distinctions when reviewing annuity contracts.
Income begins sooner.
Immediate annuities are generally purchased with a single payment and are structured to begin income shortly after purchase.
One-time purchase payment
Income begins relatively soon
Several payout structures may be available
Contract terms determine payments
Income is planned for later.
Deferred contracts allow time for accumulation before income begins or another permitted distribution method is used.
Single or multiple purchase payments may be allowed
Accumulation period comes first
Income can begin at a future date
Withdrawal terms vary by contract
Income Choices
The payout structure changes how income works.
Annuity contracts may provide several income choices. Availability and payment amounts depend on the contract selected.
Certain payout options can provide payments for the annuitant's life.
Some options can continue payments based on two covered lives.
Certain contracts may provide income for a stated period under selected terms.
Deferred annuities may allow withdrawals subject to contract provisions and charges.
Income Planning
Review how long income lasts
and what happens under each payout option.
How Contract Value Works
Fixed, indexed and variable annuities work differently.
Product availability depends on carrier, contract type, applicable licensing and other requirements.
Contract-based interest.
Fixed annuities credit interest according to rates and guarantees stated by the issuing insurer under the contract.
Insurance contract
Stated interest provisions
Minimum guarantees may apply
Subject to insurer claims-paying ability
Index-linked crediting.
Indexed annuities determine certain credited interest using a formula linked to an external reference index.
External index reference
Participation rates may apply
Caps or spreads may apply
Contract controls credited interest
Investment-based contract value.
Variable annuities allow value to be allocated to investment choices and involve investment risk, including possible loss.
Securities product
Investment choices
Value can rise or fall
Prospectus and securities rules apply
Access to Contract Value
Check the withdrawal rules before committing money.
Annuities are generally designed for longer-term goals. Taking money out early can affect contract value and may trigger charges or other consequences.
01
Surrender charges
Some contracts impose charges when money is withdrawn during a stated surrender period.
02
Free-withdrawal provisions
Certain contracts may permit limited withdrawals without a surrender charge.
03
Contract adjustments
Some products may apply market-value or other contract adjustments.
04
Tax considerations
Withdrawals can have tax consequences. Tax treatment depends on the contract and individual circumstances.
Insurance Company Guarantees
An annuity is only as strong as its contract.
Insurance guarantees depend on the terms of the contract and the claims-paying ability of the issuing insurer.
Review the insurer, not just the illustrated rate.
Annuities are insurance contracts. Contract guarantees are obligations of the issuing insurance company.
01
Contract Guarantees
Identify which rates, values or income provisions are contractually guaranteed.
02
Non-Guaranteed Elements
Some rates and contract features may change within limits stated in the contract.
03
Financial Strength
Review the issuing insurer when considering long-term contractual promises.
04
Contract Documents
Read the actual contract and applicable disclosure documents before purchase.
Before Selecting an Annuity
Start with the job you need the contract to do.
An annuity should be reviewed in relation to income timing, available liquidity, contract length and financial goals.
01
When will you need the money?
Compare your time horizon with the contract's surrender period.
02
How much liquidity do you need?
Keep access needs in mind before placing funds into a long-term contract.
03
When should income begin?
Decide whether the goal is current income, future income or accumulation.
04
What contract terms apply?
Review rates, charges, income choices, beneficiaries and withdrawal provisions.
Getting Started
Review the purpose first, then compare the contracts.
Income timing, liquidity and contract terms should be considered before selecting an annuity.
01
Define the goal.
Identify whether the primary need is accumulation, current income or future retirement income.
02
Review the timeline.
Consider when funds may be needed and when income should begin.
03
Compare contract terms.
Review guarantees, crediting methods, surrender charges and income choices.
04
Read the contract.
Review the actual insurance contract and required disclosure documents before purchase.
Annuities FAQ
Common questions.
Annuity features differ by insurer and contract.
An annuity is an insurance contract under which money may accumulate and the insurer can provide payments beginning immediately or at a future date, depending on the contract.
Immediate annuities are designed to begin income relatively soon after purchase. Deferred annuities generally have an accumulation period before income begins.
A fixed annuity credits interest according to provisions stated in the insurance contract. Applicable rates and guarantees depend on the product and insurer.
An indexed annuity uses a formula linked to an external reference index to determine certain credited interest. Participation rates, caps, spreads and other terms may affect the result.
A variable annuity is an insurance contract and securities product that allows money to be allocated among investment choices. Contract value can rise or fall with investment performance.
Yes. Many deferred annuities can impose surrender charges when certain withdrawals are made during a stated surrender period.
Contract guarantees are obligations of the issuing insurance company and depend on its claims-paying ability. Applicable state guaranty protections have separate rules and limits.
Yes. Tax treatment can depend on the type of annuity, account ownership, funding source, distribution method and individual circumstances. A qualified tax professional can address individual tax questions.
Annuities
Review income timing, contract terms and liquidity together.
Tell Trinity about your retirement-income goals, timeline and contract needs to begin reviewing available annuity options.
Product availability, eligibility, interest-crediting
methods, guarantees, income options, withdrawal provisions,
surrender charges and other contract terms vary by carrier
and product. Insurance guarantees are subject to the
claims-paying ability of the issuing insurer. Variable
annuities involve investment risk and are securities products.
Withdrawals may have tax consequences. Trinity does not
provide tax or legal advice. Consult the applicable contract
and qualified tax or legal professionals for individual advice.