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What You Should Know About Annuities

SWAN Financial Freedom wants you to be comfortable working with us and we do want you to understand as much as possible when you make your decision to secure your future. Below are some of the most common questions we get from our customers, so feel free to click on any of the questions to get the answers:

What is an annuity?
What are the different types of annuities?
Why haven’t I heard of this opportunity before?
How are the interets rates set for my Fixed Annuity?
What are Fixed Indexed Annuities?
How are Fixed Indexed Annuities different from other Fixed Annuities?
What are some of the Fixed Indexed Annuities contract features?
How do the common indexing methods differ?
Features and trade-offs in different indexing methods?
What is the impact of som other Fixed-Indexed Annuities product features?
What will it cost me to take my money before the end of the term?
What charges may be subtracted from my Fixed Indexed Annuity?
Are dividends included in the index?
How do I know if a Fixed Indexed Annuity is right for me?
How do I know which Fixed Indexed Annuity is right for me?
What are some Fixed Annuity contract benefits?
How do I know if a Fixed Annuity is right for me?
Can my annuity’s value be different depending on my choice of benefits?
What about the tax treatment of annuities?
What is a “Free Look” provision?
What questions should I ask the agent or the company?
What should I also consider?

 
WHAT IS AN ANNUITY?

An annuity is a contract in which an insurance company makes a series of income payments at regular intervals in return for a premium or premiums you have paid. Annuities are most often bought for future retirement income. Only an annuity can pay an income that can be guaranteed to last as long as you live.

An annuity is not a life insurance nor a health insurance policy. It’s not a savings account or a savings certificate. You should not buy an annuity to reach short-term financial goals.

Your value in an annuity contract is the premiums you’ve paid, less any applicable charges, plus interest credited. The insurance company uses the value to figure the amount of most of the benefits that you can choose to receive from an annuity contract. This guide explains how interest is credited, as well as some typical charges and benefits of annuity contracts.

A deferred annuity has two parts or periods. During the accumulation period, the money you put into the annuity, less any applicable charges, earns interest. The earnings grow tax-deferred as long as you leave them in the annuity. During the second period, called the payout period, the company pays income to you or to someone you choose.

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WHAT ARE THE DIFFERENT TYPES OF ANNUITIES?

This section explains major differences in different types of annuities to help you understand how each might meet your needs. Look at the specific terms of an individual contract you’re considering and the disclosure document you receive. If your annuity is being used to fund or provide benefits under a pension plan, the benefits you get will depend on the terms of the plan. Contact your pension plan administrator for information.

Single Premium or Multiple Premiums.
You pay the insurance company only one payment for a single premium annuity. You make a series of payments for a multiple premium annuity. There are two kinds of multiple premium annuities. A flexible premium contract, within set limits, allows you to pay as much premium as you want, whenever you want. In a scheduled premium annuity, the contract spells out your payments and how often you need to make them.

Immediate or Deferred
With an immediate annuity, income payments start no later than one year after you pay the premium, and several annuities have the option to start 30 days after the initial premium. You usually pay for an immediate annuity with one payment. The income payments from a deferred annuity often start many years later. Deferred annuities have an accumulation period, which is the time between when you start paying premiums and when income payments start.

Fixed or Variable

Fixed
During the accumulation period of a fixed annuity, your money (less any applicable charges) earns interest at rates set by the insurance company or in a way spelled out in the annuity contract. The company guarantees that it will pay no less than a minimum rate of interest. During the payout period, the amount of each income payment to you is generally set when the payments start and will not change, unless you have selected various riders that can, for example, take inflation into consideration.

Variable
During the accumulation period of the variable annuity, the insurance company puts your premiums (less any applicable charges) into a separate account. You decide how the company will invest those premiums, depending on how much risk you want to take. You may put your premium into a stock, bond or other account, with no guaranteed interest. During the payout period of a variable annuity, the amount of each income payment to you may be fixed (set as the beginning) or variable (changing with the value of the investments in the separate account).

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WHY HAVEN'T I HEARD OF THIS OPPORTUNITY BEFORE?

So why haven’t you heard of this opportunity before and why hasn’t your current financial advisor made you aware of this alternative?

Because your financial advisor, more than likely, has your funds invested in a “stock market vehicle", i.e. mutual funds, individual stocks, etc. and his/her fee is transaction based. The more transactions, the more fees generated. In most cases, whenever you move your funds, a fee is involved. Another scenario is that the advisor’s fee is a percentage of the account value, so regardless of the account’s performance, the advisor always makes a buck. Although it would most likely be in your best interest to have your retirement dollars in this type product, it wouldn’t be in your financial advisor’s.

With fixed indexed annuities, there is a one- time commission to your advisor, which is paid by the insurance company.

There is also a very good possibility that your advisor may not be familiar with this strategy as this is an insurance product and more than likely, your advisor has a Wall Street mentality.

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HOW ARE THE INTEREST RATES SET FOR MY FIXED ANNUITY?

During the accumulation period, your money (less any applicable charges) earns interest at rates that change from time to time. Usually, what these rates will be is entirely up to the insurance company. In most circumstances, these rates will be determined by the insurance company based on prevailing market conditions.

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WHAT ARE FIXED-INDEXED ANNUITIES?

An fixed-indexed annuity is an annuity, either immediate or deferred, that earns interest or provides benefits that are linked to, not invested in, an external equity reference or an equity index. One of the most commonly used indices is Standard & Poor’s 500 Composite Stock Price Index (The S&P 500), which is an equity index. The value of any index varies from day to day and is not predictable.

When you buy an fixed-indexed annuity you own an insurance contract. You are not buying shares of any stock or index and your principal is not invested in the stock market.

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HOW ARE FIXED-INDEXED ANNUITIES DIFFERENT FROM OTHER FIXED ANNUITIES?

An equity-indexed annuity is different from other fixed annuities because it credits interest to your annuity’s value with a fixed interest rate. Some fixed annuities only credit interest calculated at a rate set in the contract. Other fixed annuities credit interest set from time to time by the insurance company. Fixed-indexed annuities credit interest using a formula based on changes in the index to which the annuity is linked. The formula decides how the additional interest, if any, is calculated and credited. How much additional interest you get and when you get it, depends on the features of your particular annuity (or how the index you selected performed).

Your fixed-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate, even if the index-linked interest rate is lower. The value of your annuity also will not drop below a guaranteed minimum. For example, many single premium contracts guarantee that the minimum value will never be less than 90 percent of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The guaranteed value is the minimum amount available during a term for withdrawals, as well as for some annuitizations and death benefits. The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.

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WHAT ARE SOME FIXED-INDEXED ANNUITIES CONTRACT FEATURES?

Two features that have the greatest effect to at the amount of additional interest that may be credited to an fixed-indexed annuity are the indexing method selected and the participation rate. It is important to understand the features and how they work together. The following describes some other equity-indexed annuity features that affect the index-linked opportunity.

Indexing method
The indexing method means the approach used to measure the amount of change, if any, in the index. Some of the most common indexing methods, which are explained more fully later on, include annual reset (ratcheting), high-water mark and point-to-point.

Term
The index term is the period over which index-linked interest is calculated. The interest is credited to the annuity at the end of a term. Terms are generally from one to ten years, with six or seven years being most common. Some annuities offer single terms while others offer multiple, consecutive terms, there will usually be a window at the end of every term, typically 30 days, during which you may withdraw your money without penalty. For installment premium annuities, the payment of each premium may begin a new term for that premium.

Participation Rate
The participation rate decides how much of the increase in the index will be used to calculate index-linked interest. For example, if the calculated change in the index is 9%, and the participation rate is 70%, the index-linked interest rate for your annuity will be 6.3% (9% x 70%=6.3%). A company may set a different participation rate for newly issued annuities as often as each day. Therefore, the initial participation rate in your annuity will depend on when it is issued by the company. The company usually guarantees the participation rate for a specific period (from one year to the entire term). When that period is over, the company sets a new participation rate for the next period. Some annuities guarantee that the participation rate will never be set lower than the specified minimum or higher than a specified maximum.

Cap Rate or Cap
Some annuities may put an upper limit, or cap, on the index-linked interest rate. This is the maximum rate of interest the annuity will earn. In the example given above, if the contract has a 6% cap rate, 6% and not 6.3% would be credited. Not all annuities have a cap rate.

Floor on Fixed Index-Linked interest
The floor is the minimum index-linked interest rate you will earn. The most common floor is 0%. A 0% floor assures that even if the index decreases in value, the index-linked interest that you earn will be zero and not negative. As in the case of a cap, not all annuities have a stated floor on index-linked interest rates. But in all cases, your fixed annuity will have a minimum guaranteed value.

Averaging
In some annuities, the average of an index’s value is used rather than the actual value of the index on a specific date. The index averaging may occur at the beginning, the end, or throughout the entire term of the annuity.

Interest Compounding
Some annuities pay simple interest during an index term. That means index-linked interest is added to your original premium but does not compound during the term. Others pay compound interest during a term, which means that index-linked interest that has already been credited, also earns interest in the future. In either case, however, the interest earned in one term is usually compounded in the next.

Margin/Spread/Administrative Fee
In some annuities, the index-linked interest rate is computed by subtracting a specific percentage from any calculated change in the index. This percentage sometimes referred to as the “margin”, “spread” or “administrative fee”, might be instead of, or in addition to, a participation rate. For example, if the calculated change in the index is 10%, your annuity might specify that 2.25% will be subtracted from the rate to determine the interest rate credited. In this example, the company subtracts the percentage only if the change in the index produces a positive interest rate.

Vesting
Some annuities credit none of the index-linked interest or only part of it, if you take out all your money before the end of the term. The percentage that is vested, or credited, generally increases as the term comes closer to its end and is always 100% at the end of the term.

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HOW DO THE COMMON INDEXING METHODS DIFFER?

Annual Reset
Index-linked interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to your annuity each year during the term.

High-Water Mark
The index-linked interest, if any, is determined by looking at the index value at various points during the term, usually the annual anniversaries of the date you bought the annuity. The interest is based on the difference between the highest index value and the index value at the start of the term. Interest is added to your annuity at the end of the term.

Low-Water Mark
The index-linked interest, if any, is determined by looking at the index value at various points during the term, usually the annual anniversaries of the date you bought the annuity. The interest is based on the difference between the index value at the end of the term and the lowest index value. Interest is added to your annuity at the end of the term.

Point to Point
The index-linked interest, if any is based on the difference between the index value at the end of the term and the index value at the start of the term. Interest is added to your annuity at the end of the term.

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FEATURES AND TRADE-OFFS OF DIFFERENT INDEXING METHODS?

Annual Reset Feature
Since the interest earned is “locked in” annually and the index value is “reset” at the end of each year, future decreases in the index will not affect the interest you have already earned. Therefore, your annuity using the annual reset method may credit more interest than annuities using other methods when the index fluctuates up and down, often during the term. This design is more likely than others to give you access to index-linked interest before the term ends.

Annual Reset Trade Off
Your annuity’s participation rate may change each year and generally will be lower than that of other indexing methods. Also, an annual reset design may use a cap or averaging to limit the total amount of interest you might earn each year

High Water Mark Feature
Since interest is calculated using the highest value of the index on a contract anniversary during the term, this design may credit higher reaches than some other designs if the index reaches a high point early in the middle of the term, then drops off at the end of the term.

High Water Mark Trade Off
Interest is not credited until the end of the term. In some annuities, if you surrender your annuity before the end of the term, you may not get index-linked interest for that term. In other annuities, you may receive index-linked interest, based on the highest anniversary value to date and the annuity’s vesting schedule. Also contracts with this design may have a lower participation rate than annuities using other designs or may use a cap to limit the total amount of interest you might earn.

Low Water Mark Feature
Since the interest is calculated using the lowest value of the index, prior to the end of the term, this design may credit higher interest than some other designs, if the index reaches a low point early or in the middle of the term and then rises at the end of the term.

Low Water Mark Trade Off
Interest is not credited until the end of the term. In some annuities, if you surrender your annuity before the end of the term, you may not get index-linked interest for that term. In other annuities, you may receive index-linked interest, based on a comparison of the lowest anniversary value to date with the index value at surrender and annuity’s vesting schedule. Also contracts with this design may have a lower participation rate than annuities using other designs or may use a cap to limit the total amount of interest you might earn.

Point-to-Point Feature
Since the interest cannot be calculated before the end of the term, use of this design may permit a higher participation rate than annuities using other designs.

Point-to-Point Trade Off
Interest is not credited until the end of the term, typically six or seven years. You may not be able to get the index-linked interest until the end of the term.

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WHAT IS THE IMPACT OF SOME OTHER FIXED-INDEXED ANNUITIES PRODUCT FEATURES?

Cap on Interest Earned
While a cap limits the amount of interest you might earn each year, annuities with this feature may have other product features you want, such as annual interest crediting or the ability to take partial withdrawals. Also annuities that have a cap may have a higher participation rate.

Averaging
Averaging at the beginning of a term protects you from buying your annuity at a high point, which would reduce the amount of interest you might earn. Averaging at the end of the term protects you against severe declines in the index and losing index-linked interest as a result. On the other hand, averaging may reduce the amount of index-linked interest you earn when the index rises either near the start or at the end of the term.

Participation Rate
The participation rate may vary greatly from one annuity to another and from time to time within a particular annuity. Therefore, it is important for you to know how your annuity’s participation rate works with the indexing method. A high participation rate may be offset by other features, such as simple interest, averaging or a point-to-point indexing method. On the other hand, an insurance company may offset a lower participation rate by also offering a feature such as an annual reset indexing method.

Interest Compounding
It is important for you to know whether your annuity pays compound or simple interest during a term. While you may earn less from an annuity that pays simple interest, it may have other features you want, such as a higher participation rate.

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WHAT WILL IT COST ME TO TAKE MY MONEY BEFORE THE END OF THE TERM?

In addition to the information discussed in this section about surrender and withdrawal charges and free withdrawals, there are additional considerations for fixed-indexed annuities. Some annuities credit none of the index-linked interest or only part of it if you take out money before the end of the term. The percentage that is vested, or credited, generally increases as the term comes closer to its end and is always 100% at the end of the term.

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WHAT CHARGES MAY BE SUBTRACTED FROM MY FIXED INDEXED ANNUITY?

Most annuities have charges related to the cost of selling or servicing it. These charges may be subtracted directly from the contract value. Ask your agent or the company to describe the charges that apply to your annuity. Some examples of charges, fees and taxes are:

Surrender or withdrawal charges
If you need access to your money, you may be able to take all or part of the value out of your annuity at any time during the accumulation period. If you take out part of the value, you may pay a withdrawal charge. If you take out all of your value and surrender, or terminate, the annuity, you may pay a surrender charge. In either case the company may figure the charge as a percentage of the value of the contract, of the premiums you’ve paid and of the amount you’re withdrawing. The company may reduce or even eliminate the surrender charge after you’ve had the contract for a number of years. A company may waive the surrender charge when it pays a death benefit.

Some annuities have stated terms. When the term is up, the contract may automatically expire or renew. You’re usually given a short period of time, called a window, to decide if you want to renew or surrender the annuity. If you surrender during the window, you won’t have to pay surrender charges. If you renew, the surrender or withdrawal charges may start over.

In some annuities, there is no charge if you surrender your contract when the company’s current interest falls below a certain level. This may be called a bail-out option.

In a multiple-premium annuity, the surrender charge may apply to each premium paid for a certain period. This may be called a rolling surrender or withdrawal charge.

Some annuity contracts have a market value adjustment feature. If interest rates are different when you surrender your annuity than when you bought it, a market value adjustment may make the cash surrender value higher or lower. Since you and the insurance company share this risk, an annuity with a MVA feature may credit a higher rate than an annuity without that feature.

Be sure to read the Tax Treatment section and ask your tax advisor for information about possible tax penalties or withdrawals.

Free Withdrawal
Your annuity may have a limited free withdrawal feature. That lets you make one or more withdrawals without a charge. The size of the free withdrawal is often limited to a set percentage of your contract value. If you make a larger withdrawal, you may pay withdrawal charges. You may lose any interest above the minimum guaranteed rate on the amount withdrawn. Some annuities waive withdrawal charges in certain situations, such as death, confinement in a nursing home or terminal illness.

Contract Fee
A contract fee is a flat dollar amount charged either once or annually.

Transaction Fee
A transaction fee is a charge per premium payment or other transaction.

Percentage of Premium Charge
A percentage of premium charge is a charge deducted from each premium paid. The percentage may be lower after the contract has been in force for a certain amount of years after total premiums paid have reached a certain amount.

Premium Tax
Some states charge a tax on annuities, The insurance company pays this tax to the state. The company may subtract the amount of the tax when you pay your premium, when you withdraw your contract value, when you start to receive income payments or when it pays a death benefit to your beneficiary.

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ARE DIVIDENDS INCLUDED IN THE INDEX?

Depending on the index used, stock dividends may or may not be included in the index’s value. For example, the S&P 500 is a stock price index and only considers the prices of stocks. It does not recognize any dividends on those stocks.

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HOW DO I KNOW IF A FIXED INDEXED ANNUITY IS RIGHT FOR ME?

The questions listed below may help you decide which type of annuity, if any, meets your retirement planning and financial needs. You should consider what your goals are for the money you may put into the annuity. You need to think about how much risk you’re willing to take with the money. Ask yourself:

• Am I interested in a variable annuity with the potential for higher earnings that are not guaranteed and
willing to risk losing the principal?
• Is a guaranteed interest rate more important to me, with little or no risk of losing principal?
• Or, am I somewhere in between these two extremes and willing to take some risks?

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HOW DO I KNOW WHICH FIXED-INDEXED ANNUITY IS BEST FOR ME?

As with any other insurance product, you must carefully consider your own personal situation and how you feel about the choices available. No single annuity design may have all the features you want. It is important to understand the features and trade-offs available so you can choose the annuity that is right for you. Keep in mind that it may be misleading to compare one annuity to another unless you compare all the other features of each annuity. You must decide for yourself what combination of features makes the most sense for you. Also remember that it is not possible to predict the future behavior of an index.

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WHAT ARE SOME FIXED INDEXED ANNUITIES CONTRACT BENEFITS?

Annuity Income Payments
One of the most important benefits or fixed indexed annuities is your ability to use the value built up during the accumulation period to give you a lump sum payment or to make income payments during the payout period. Income payments are usually made monthly but you may choose to receive them less often. The size of income payments is based on the accumulated value in your annuity and the annuity’s benefit rate in effect when income payments start. The benefit rate usually depends on your age and sex, and the annuity payment option you choose. For example, you might choose payments that continue as long as you live, as long as your spouse lives or for a set number of years.

There is a table of guaranteed benefit rates in each annuity contract. Most companies have current benefit rates as well. The company can change the current rates at any time, but the current rates can never be less than the guaranteed benefit rates. When income payments start, the insurance company generally uses the benefit rate in effect at that time to figure the amount of your income payment.

Companies may offer various income payment options. You (the owner) or another person that you name may choose the option. The options are described here as if the payments are made to you.

Life only
The company pays income for your lifetime. It doesn’t make any payments to anyone after you die. This payment option usually pays the highest income possible. You might choose it if you have no dependents, if you have taken care of them through other means or if the dependents have enough income of their own.

Life Annuity with Period Certain
The company pays income for as long as you live and guarantees to make payments for a set number of years even if you die. This period is usually 10 or 20 years. If you live longer than the period certain, you’ll continue to receive the payments until you die. If you die during the period certain, your beneficiary gets regular payments for the rest of that period. If you die after the period certain, your beneficiary doesn’t receive any payments from your annuity. Because the “period certain” is an added benefit, each income payment will be smaller than a life-only option.

Joint and Survivor
The company pays income as long as either you or your beneficiary lives. You may choose to decrease the amount of the payments after the first death. You may also be able to choose to have payments continue for a set length of time. Because the survivor feature is an added benefit, each payment is smaller than the life-only option.

Death Benefit
In some annuity contracts, the company may pay a death benefit to your beneficiary if you die before the income payments start. The most common death benefit is the contract value or premiums paid, whichever is more.

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HOW DO I KNOW IF A FIXED INDEXED ANNUITY IS THE RIGHT FOR ME?

The questions listed below may help you decide which type of annuity, if any, meets your retirement planning and financial needs. You should think about what your goals are for the money you may put into the annuity. You need to think about how much risk you’re willing to take with the money. Ask yourself:

• How much retirement income will I need in addition to what I will get from Social Security and my pension?
• Will I need that additional income only for myself or for myself and somebody else?
• How long can I leave my money in the annuity?
• When will I need income payments?
• Does the annuity let me get money when I need it?
• Do I want a fixed annuity with a guaranteed interest rate and little or no risk of losing the principal?
• Do I want a variable annuity with the potential of higher earnings that aren’t guaranteed and the possibility
that I may risk losing some or all of my principal?
• Or, am I somewhere in between and willing to take some risks with an equity-indexed annuity, knowing
there is no risk to my principal but there could be some years where there are no gains?


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CAN MY ANNUITY’S VALUE BE DIFFERENT DEPENDING ON MY CHOICE OF BENEFIT?

While all annuities offer a choice of benefits, some use different accumulated values to pay different benefits. For example, and annuity may use one value if annuity payments are for retirement benefits and a different value if the annuity is surrendered.

As another example, an annuity may use one value for long-term care benefits and a different value if the annuity is surrendered. You can’t receive more than one benefit at the same time.

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WHAT ABOUT THE TAX TREATMENT OF ANNUITIES?

Below is a general discussion about taxes and annuities. You should consult a professional tax advisor to discuss your individual tax situation.

Under current federal law, annuities receive special tax treatment. Income tax on annuities is deferred, which means you aren’t taxed on the interest your money earns while it stays in the annuity. Tax-deferred accumulation isn’t the same as tax-free accumulation. An advantage of tax deferral is that the tax bracket you’re in when you receive annuity income payments may be lower than the one you’re in during the accumulation period. You’ll also be earning interest on the amount you would have paid in taxes during the accumulation period. Most states’ tax laws on annuities follow the federal law.

Part of the payments you receive from an annuity will be considered as a return of the premium you’ve paid. You won’t have to pay taxes on that part. Another part of the payments is considered interest you’ve earned. You must pay taxes on the part that is considered interest when you withdraw the accumulation before age 59½. The internal Revenue Code also has rules about distributions after the death of a contract holder.

Annuities used to fund certain employee pension benefit plans (those under the Internal Revenue Code Section 401(a), 402(k), 403(b), 457 or 414) defer taxes on plan contributions as well as on interest or investment income. Within the limits set by the law, you can use pretax dollars to make payments to the annuity. When you take money out, it will be taxed. You can also use annuities to fund traditional and Roth IRAs under Internal Revenue Code Section 408. If you buy an annuity to fund an IRA, you’ll receive a disclosure statement describing the tax treatment.

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WHAT IS A “FREE LOOK” PROVISION?

Many states have laws that give you a set number of days to look at the annuity contract after you buy it. If you decide during that time you don’t want the annuity, you can return the contract and get all your money back. This is often referred to as a free look period or right to return period. The free look period should be prominently stated in your contract. Be sure to read your contract during the free look period.

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WHAT QUESTIONS SHOULD I ASK MY AGENT OR THE COMPANY?

• Is this a single premium or multiple premium contract?
• Is this an fixed-indexed annuity?
• What is the initial interest rate and how long is it guaranteed?
• Does the initial rate include a bonus rate and how much is this bonus?
• What is the guaranteed minimum interest rate?
• What renewal rate is the company crediting on annuity contracts of the same type that were issued last year?
• Are there withdrawal or surrender charges or penalties if I want to end my contract early and take out all
my money? How much are they?
• Can I get a partial withdrawal without paying surrender or other charges or losing interest?
• Does my annuity waive withdrawal charges for such reasons as death, confinement in a nursing home
or terminal illness?
• Is there a market value adjustment (MVA) provision in my annuity?
• What other charges, if any, may be deducted from my premium or contract value?
• If I pick a shorter or longer payout period or surrender the annuity, will the accumulated value or the way
interest is credited change?
• Is there a death benefit? How is it set? Can it change?
• What income payment options can I choose? Once I choose a payment option, can I change it?

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WHAT SHOULD I ALSO CONSIDER?

Before you decide to buy an annuity, you should review the contract. Terms and conditions of each annuity contract will vary.

Ask yourself if, depending on your needs or age, this annuity is right for you. Taking the money out of an annuity may mean you must pay taxes. Also, while it’s sometimes possible to transfer the value of an older annuity into a new annuity, the new annuity may have a new schedule of charges that could mean new expenses you must pay directly or indirectly.

You should understand the long-term nature of your purchase. Be sure you plan to keep an annuity long enough so that the charges don’t take too much of the money you put in and be sure you understand the effect of all charges.

If you’re buying an annuity to fund an IRA or other tax-deferred retirement program, be sure that you’re eligible. Also, ask if there are any restrictions connected with the program.

Remember that the quality of service that you can expect from the company and the agent is a very important factor in your decision.

When you receive your annuity contract, READ IT CAREFULLY!! Ask the agent and company for an explanation of anything you don’t understand. Do this before any free look period ends.

Compare information for similar contracts from several companies. Comparing products may help you make a better decision

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