A tax-deferred fixed annuity is an insurance contract between an individual (or trust) and an insurance company. Fixed annuities offer guaranteed fixed interest accumulation year after year.

Types of fixed annuities:

• Immediate Annuities
  About immediate annuities
  Request an income quote
   
• Deferred Annuities
  About tax deferred annuities
  Advantages of fixed annuities
  Interest rates
  Request a deferred annuity illustration
   
• Indexed Annuities
  About Fixed Indexed Annuities
  Guaranteed Withdrawal Benefits
   
• Annuities for agents
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• California Life & Health Guarantee Association
  Changes as of 07/27/2011
   

WHAT IS A DEFERRED ANNUITY USED FOR?

Deferred annuities are primarily used as an accumulation vehicle for retirement savings. The most used type of single premium deferred annuity is the Multi-Year Guarantee Annuity.

The MYGA has an initial term from 1-10 years. The rate on a MYGA is set at issue and will not change during the initial term. After the initial term, the full accumulation value is available for withdrawal or transfer. This gives the ability to know the exact account value at any time in the future. An advantage to the MYGA is the comfort in knowing the rate will not reduce during the initial term and after the initial term the full accumulation value is available for withdrawal or transfer. An MYGA is a guarantee for your financial future.

TAX DEFERRAL

Tax-deferral means postponing your taxes on interest earnings until a future point in time. In the meantime, you earn interest on the money you're not paying in taxes. You can accumulate more money over a shorter period of time, which ultimately will provide you with a greater income.

With an MYGA, taxes are not paid on the interest earned until a withdrawal is made, unlike a bank CD where interest is taxed annually. (Please note that money not previously taxed is taxed as income when withdrawn. Withdrawals from a Tax-Qualified Plan before age 59½ may be subject to a 10% federal tax penalty.)

To illustrate - the increased earnings capacity of tax-deferred interest compared to fully-taxable earnings. $100,000 at 6.0% will earn $6,000 of interest in a year. A 30% tax bracket means that approximately $1,800 of those earnings will be lost in taxes, leaving only $4,200 to compound the next year. If these same earnings were tax-deferred, the full $6,000 would be available to earn even more interest. The longer you can postpone taxes, the greater your gain.

Interest earnings in a fixed annuity accumulate free from current taxation until you make a withdrawal.  This can have a significant impact on the growth of your savings over time.

There are no charges or fees on any Single Premium Deferred Annuities. All funds go to work immediately, no upfront or back-end loads. Rates quoted are net of all expenses.

LIQUIDITY
Most deferred annuities allow for an annual penalty free withdrawal. The free withdrawal is a percentage of the accumulated value, usually this percentage is between 3% and 10%. Early withdrawal charges may apply on amounts withdrawn in excess of the free withdrawal provisions within the contract.

SAFETY
Fixed annuities are guaranteed by the claim paying ability of major, top rated life insurance companies. We will provide financial information on all carriers we represent. (Company ratings represent an opinion of financial strength and the company's ability to meet ongoing obligations to policyholders.)

GUARANTEES
Interest rates inside a fixed annuity are guaranteed. Principal and annuity purchase rates are also guaranteed. Some fixed annuities offer a money-back guarantee at anytime.

AVOIDING PROBATE
At death, the annuity may be transferred to named beneficiaries, avoiding the probate process.