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An annuity can provide you with a tax-deferred way of saving for your retirement. And once you’ve retired, an annuity can give you a guaranteed stream of income for as long as you live.* It’s like getting a paycheck for the rest of your life; and it can help you maximize your income throughout retirement.

What’s an annuity?
An annuity, in its simplest form, is a stream of income. It may last your lifetime or some other specified period. Payments can start now (an immediate annuity), or at some time in the future (a deferred annuity).

Why buy one?
An annuity can help you save for retirement, tax-deferred, and may allow you to enjoy a steady stream of income for the rest of your life. An annuity can also help to maximize your income throughout retirement; a way to cover your basic expenses, allowing you to more efficiently invest your remaining assets to grow your overall portfolio.

What is an immediate annuity?
With an immediate (or income) annuity, you generally pay the insurer a single amount in exchange for payments that begin immediately (within 12 months). Payments must be no less frequent than annually. Payments continue for your entire lifetime, or for some other duration offered by the insurer, such as the joint lifetimes of you and another person, or a specified number of years. Depending on the option you choose, there may also be a death benefit, where payments may continue to your beneficiary for some time after you die.

What is a deferred annuity?
A deferred annuity is a type of personal account intended for long-term savings goals, like retirement. Unlike an immediate annuity, income payments are optional and are deferred until a future time. Deferred annuities have two phases: the savings and investment phase, where your earnings accumulate tax-deferred, and the income phase, where you can receive regular payments for your lifetime or another period. Deferred annuities typically allow withdrawals during the savings and investment (or accumulation) phase, and entering into the income phase is typically optional. Early withdrawal charges and ordinary income taxes apply at withdrawal, and tax penalties for withdrawals before age 59½ may apply.

What is a deferred income annuity?
A deferred income annuity is a type of deferred annuity whose features are designed to help maximize your future income. It’s sometimes called "longevity insurance." Flexibility during the accumulation phase (such as the availability of withdrawals) may be limited in exchange for guaranteed payments during the income phase.

Are earnings within a deferred annuity taxed before withdrawn?
No, not until you withdraw them (except for "non-natural persons", e.g., a business).

How are withdrawals from a deferred annuity taxed?
Your annuity’s earnings, when withdrawn, are taxed as ordinary income. Your contributions, when withdrawn, are not taxed. For taxation purposes, withdrawals are treated as coming from earnings first, then contributions. Withdrawals of earnings prior to age 59½ are generally subject to an additional 10% tax penalty. There are additional rules and exceptions; see your tax advisor for more details. More information is also available in IRS Publication 575, Pension and Annuity Income.

How are payments from an immediate annuity taxed?
No tax is payable until you receive a payment. Generally, each payment is partly allocable to your original contribution; that part of the payment is not taxed. The rest of the payment is taxable as ordinary income. There are additional rules and exceptions; see your tax advisor for more details. More information is also available in IRS Publication 575, Pension and Annuity Income.

Is an annuity appropriate for my IRA?
It can be. An immediate annuity can provide guaranteed income for your whole life. People often buy deferred annuities because they are tax-deferred. But since IRAs are already tax-deferred, there is no tax-related reason to use a deferred annuity for your IRA. But you may consider a deferred annuity for your IRA because of the annuity’s other features.

*Guarantees are based on the claims paying ability of the issuing company.

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