Annuities 101, part 1: what is a variable annuity?

march 31, 2023


What is an annuity? Part one of Jackson’s three part series explains what a variable annuity is and how it can help you on your retirement journey.

Variable annuities are long-term, tax-deferred investments designed for retirement, involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on benefits* available for an extra charge in addition to the ongoing fees and expenses of the variable annuity, can also provide protection and legacy options.

 

Let's talk about Variable Annuities

Want to know how to grow assets, receive income, and protect a portion of your portfolio? When you meet with your financial professional, ask about a variable annuity and how this product might fit into your retirement plan.

 

Ask about protection.

In a volatile market, protection of retirement assets is an important conversation to have with your financial professional.  First, consider: What are you protecting? It’s a simple question—and very important to ask. Beyond necessities such as your home, business, or car, there is also your financial portfolio. What risks do you need to protect your portfolio against?  

  • Longevity: How long you will live and need income.
  • Inflation: How much your nest egg will be worth in the future compared to now. 
  • Volatility: How market fluctuations can impact your savings. 

 

Ask about income.

Especially as lifespans increase, potentially running out of money is a concern for many retirees. One way to reduce this risk is by increasing your protected lifetime income. A variable annuity can be used as a tool to help bridge the gap between how much money you have and how much you’ll need in retirement. It is called a variable annuity because the payments you receive can vary based on the performance of the underlying investments.

Many variable annuities offer optional add-on benefits, available for an additional cost, that can offer protection against market volatility and provide guaranteed income for life. In fact, a variable annuity can provide a guaranteed amount of income each month for a set period, or for life—even if the amount paid out is greater than the value of the contract. The amount of income these benefits may provide can vary depending on the age when the income begins and how many lives are covered when the benefit is elected—for instance a couple versus an individual. The cost of these benefits may negatively impact the contract’s cash value. 

 

Ask about growth.

A variable annuity enables you to spread your wealth across a wide range of investment options which may help grow your assets on a tax-deferred basis. That means you won’t pay ordinary income tax on earnings until you start withdrawing from the contract. You can also safeguard what matters most with a range of death benefit options designed to prepare your legacy wishes and protect your loved ones.

If you want to know more about the potential of a variable annuity, all you have to do is ask. Start the conversation with your financial professional. 

*Add-on benefits that provide income for the length of a designated life and/or lives may be available for an additional charge. The amount of income that these benefits may provide can vary depending on the age when income is taken, and how many lives are covered when the benefit is elected. The cost of these benefits may negatively impact the contract's cash value. There is no guarantee that a variable annuity with an add-on living benefit will provide sufficient supplemental retirement income.

†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 be found at a lower cost in other investment products. It also may not be available if the annuity is owned by a legal entity such as a corporation or certain types of trusts

Before investing, investors should carefully consider the investment objectives, risks, charges, and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses provide this and other important information. Please contact your financial professional or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

Jackson, its distributors, and their respective representatives do not provide tax, accounting, or legal advice. Any tax statements contained herein were not intended or written to be used and cannot be used for the purpose of avoiding U.S. federal, state, or local tax penalties. Tax laws are complicated and subject to change. Tax results may depend on each taxpayer’s individual set of facts and circumstances. You should rely on your own independent advisors as to any tax, accounting, or legal statements made herein.

Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York and do not apply to the principal amount or investment performance of a variable annuity’s separate account or its underlying investments. They are not backed by the broker/dealer from which this annuity contract is purchased, by the insurance agency from which this annuity contract is purchased, or any affiliates of those entities, and none makes any representations or guarantees regarding the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York.

The latest maturity date or income date allowed under an annuity contract is age 95, which is the required age to annuitize or take a lump sum. Please see the prospectus for important information regarding the annuitization of a variable annuity contract.

Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York).  Annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These contracts have limitations and restrictions. Jackson issues other annuities with similar features, benefits, limitations, and charges. Contact Jackson for more information.

Jackson® is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Company® (Home Office: Lansing, Michigan),  and Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York).