Annuities can help you protect your financial future!

An annuities are contracts between you and an insurance company.  They are designed to meet retirement and other long-range financial goals.  As part of an annuity, you make a lump-sum payment or series of (smaller) payments. In return, the insurance company agrees to make periodic payments to you beginning immediately or at some future date.

Tax-deferred growth

Typically, annuities offer tax-deferred growth of earnings. This may include a death benefit paid out to a beneficiary. While tax is deferred on earnings growth, when withdrawals are taken from the annuity, gains are taxed at ordinary income rates, and not capital gains rates. For example: With a deferred fixed annuity, you do not pay any taxes until you withdraw money from the annuity. At that time, any gains and pretax contributions are taxed as ordinary income at your current tax rate. Remember though, similar rules regarding early withdrawals of any tax-deferred account—such as an IRA—apply to annuities. Taxable amounts withdrawn before age 59½ may incur a 10% IRS early-withdrawal penalty. An exchange from one annuity to another (also called a 1035 exchange, which refers to a provision in the tax code) does not require you to pay taxes.

Surrender Charges

Furthermore, if you withdraw your money early from an annuity, you may be required to pay substantial surrender charges to the insurance company, as well as tax penalties.

How to withdraw funds from your annuity?

Generally there are three options for withdrawing from your annuity. You can withdraw assets:

  • In a single lump sum.
  • On an ad hoc or periodic basis.
  • “Annuitized” and converted into a guaranteed lifetime stream of income.

Each of these options holds an unique tax implication which should be considered before withdrawing. Ask you tax advisor or consultant for specific information.

What happens when you die?

If you die, assets from a fixed annuity typically go to the designated beneficiary [1] or beneficiaries. Your beneficiaries can generally choose to receive their portion of the balance in one of three ways:

  • All at once in a single lump sum
  • Any amount at any time, spread over a period of five years
  • A guaranteed stream of income for the rest of their lives

Next Steps…

For more information contact us today and ask for your free no-obligation quote.We will help you explore a variety of insurance options and discounts. Call us at +1 800 645 0297 or email us. Alternatively, have an insurance-licensed Sunvalley Insurance representative contact you.


[1] If your beneficiary is a spouse as defined by federal law, then he or she may elect to simply assume ownership of the contract rather than withdrawing or turning assets into an income stream.