Variable Annuity Facts
If you're building a plan for your financial future and want the potential to grow assets tax-deferred*, a variable annuity may be a portfolio addition to consider. Variable annuities are long-term, tax-deferred investments issued by insurance companies that offer a unique combination of growth potential and guarantees† designed to help you pursue your retirement and investing goals.
Most variable annuities have two phases: the accumulation phase, in which your investments have the potential to grow tax-deferred, and the distribution phase (also known as annuitization), in which you receive income payments or a lump-sum payment. You also have the opportunity to leave a legacy that allows your assets to pass on to beneficiaries. Variable annuities' benefits and features vary widely, so it's important to work with a financial professional to create a variable annuity investment plan that suits your individual objectives.
This material is intended for educational purposes and does not contain information about specific Jackson products.
*Tax deferral offers no additional value if an annuity is used to fund a qualified plan, such as a 401(k) or IRA, and may not be available if the annuity is owned by a "non-natural person" such as a corporation or certain types of trusts.
†Guarantees are backed by the claims-paying ability of the issuing insurance company.
Variable Annuity Benefits in Each Phase of Investing
Accumulation: Growing Your Money
During the accumulation phase of a variable annuity, money paid into the contract (called a premium) is allocated to investment portfolios (called subaccounts) where earnings have the potential to grow tax-deferred. Many variable annuities offer investment portfolios that are actively managed by professional money managers, thereby allowing you to create your own investment strategy among the various subaccounts.
Many variable annuities offer the option for guaranteed lifetime income at an additional charge. By choosing this option, you will continue to receive the specified payment amount, even if you live long enough that your contract value decreases to zero. Another benefit to withdrawals during the accumulation phase is that your money that stays in the contract can continue to grow while you take income.
Tax Advantages: Variable annuities can help optimize your investment potential with the benefit of tax deferral, because your money has the opportunity to grow faster and compound over time, especially if earnings and dividends are reinvested. The accompanying hypothetical example shows the growth potential of a tax deferred investment vehicle.
Distribution: Taking Your Money
During the distribution phase of the contract, a variable annuity can be converted into a series of income payments for your entire lifetime, over a set time period — or one lump-sum payment. If you begin taking withdrawal payments before age 59½, your withdrawals may be subject to additional taxes.
Tax Advantages: Because you only pay on your variable annuity at the time of withdrawl, it's possible you'll be in a lower tax bracket after you retire, thus decreasing your tax burden.
Legacy: Leaving Your Money
When your goals shift from retirement income to providing for future generations, variable annuities can be a valuable estate planning tool. Many variable annuities offer a standard death benefit that passes on to beneficiaries — usually the greater of contributions made to the annuity or the annuity contract value at death — which can give you control over how you pass on an inheritance. Some variable annuities offer enhanced death benefits at an additional charge that can help ensure a greater legacy is passed on.
Tax Advantages: Estate taxes have the potential to diminish the legacy you plan to leave your beneficiaries, but variable annuities offer options for tax-efficient wealth transfer and are not subject to probate.
Optional benefits are available for an extra cost in addition to the ongoing fees and expenses of the variable annuity. Optional benefit availability varies by product.
Learn more about the investment and benefit options available in Jackson’s variable annuities (VAs).
Whether you’re saving, retiring or ready to consider a legacy — Jackson can help.
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