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Types of Annuities

Below are brief, general descriptions of some common types of annuities.

Flexible Premium Deferred Annuity (FPDA)

Single Premium Deferred Annuity (SPDA)

Single Premium Immediate Annuity (SPIA)

Fixed Indexed Annuity

CD Annuity

Variable Annuity

Flexible Premium Deferred Annuity (FPDA)

A deferred annuity is one in which benefit payouts begin at a future date. With a flexible premium deferred annuity, you can vary the amount and frequency of premium payments (within limits specified by the contract). For example, if you are saving for retirement you might start by contributing $100/month to an FPDA, and adjust the amount and/or timing later, depending on your needs. Or you may opt to make a lump-sum contribution at any time. The interest earned accumulates on a tax-deferred basis, until benefit payouts begin.

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Single Premium Deferred Annuity (SPDA)

A deferred annuity is one in which benefit payouts begin at a future date. With a single premium deferred annuity, the annuity owner makes one premium payment at the inception of the contract. This payment and the interest earned accumulate on a tax-deferred basis, until benefit payouts begin.

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Single Premium Immediate Annuity (SPIA)

With a single premium immediate annuity, the annuity owner makes one premium payment at the inception of the contract, and the benefit payout begins immediately (e.g., one month) after the premium is paid. An immediate annuity is generally more appropriate for older persons who want to convert accumulated wealth into a guaranteed income that begins right away.

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Fixed Indexed Annuity

A fixed indexed annuity is a fixed deferred annuity that earns interest or provides benefits that are linked to an interest rate or index. The value of the most commonly used index, the Standard & Poor's 500 (registered mark) Composite Stock Price Index, or any other index varies from day to day and is not predictable.

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CD Annuity

A type of deferred annuity that guarantees a fixed interest rate for a specified period of time (typically 5-10 years). The rate is set at the time you purchase the annuity. Similar to a bank Certificate of Deposit, your interest rate does not change for the duration of the rate guarantee period you've selected.

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Variable Annuity

With a variable annuity you select from a range of investment options, typically mutual funds that invest in stocks, bonds, money market instruments, or some combination of the three. The value of your annuity will vary depending on the performance of the investment options you choose. Earnings accumulate on a tax-deferred basis.

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Tax Disclosure

 
     

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