An annuity is a special contract issued by an insurance company. While it is not an insurance policy, there are similar characteristics between an insurance policy and an annuity. There are two phases of an annuity contract:
The Accumulation Phase
In this phase, the contract holder makes a single payment or series of payments to purchase an annuity contract with either a fixed or a variable rate of return. During this phase, the growth on the investment is tax-deferred.
The Distribution Phase
In this phase, the annuity contract’s accumulated value can be converted into a guaranteed source of income that lasts a lifetime or a specific period of time. Earnings are taxed as ordinary income at the time of distribution.
Depleting Your Retirement Savings
(Income Annuity Only)
In the case of an income annuity, lock in the quote you’re considering. This secures the income rate for you for 7-14 days (depending on the insurer) while you’re completing the application. It must be accepted by the insurer “In Good Order” in this time frame in order for quote lock to apply, which typically takes about 3-4 business days from the time you complete the application.
Fill out the online application. If you have your information on hand (driver’s license, SSNs, beneficiaries, etc.).
We will review your application and reach out to you to confirm any final details before submitting it to the insurance company.
Most insurers will have a processing period of a few weeks to accept the application, process funding, and formally issue the policy.
Once the processing is complete, the insurer will provide us with your formal policy documentation, which we’ll pass along to you and make available in your online account. You’ll always have 10 days from the time you receive the policy to reject it for any reason. This is called the "Free Look Provision", and it’s required by law.
Keep track of your guaranteed income and guaranteed return via our online portal. We’ll be there to help with important milestones, like a fixed annuity approaching maturity.
Just like you diversify your stock market investments, we usually advocate diversification of annuity purchases (assuming you’re not giving up too much income or return to get it). As a result, many of our customers split their purchase across multiple insurers over time manually or via the Personal Pension program. Once you’ve created an account and secured your first annuity, the process to buy subsequent annuities will be much easier.