How does an income annuity work?
If you are in or near retirement, you probably have some money set aside in the form of
savings, CDs, mutual funds, 401(k) plans, or IRAs. A single premium immediate annuity, such as The B.E.S.T. or
B.E.S.T. FLEX Income Annuity, allows you to convert part of your retirement funds into a stream of guaranteed,
lifetime income payments using a single lump sum of money called a “premium.” In return, you receive
a check from American Savings Life on a monthly, quarterly, semi-annual or annual basis that can be guaranteed,
for the rest of your life.
How can I benefit from an income annuity?
An income annuity can help protect against the risk of outliving your savings. No matter
how long you live, you will always have the security of knowing that you have a regular monthly income. The
amount you receive each month is guaranteed, and payments will continue for as long as you live or a
predetermined period that you choose. An option even allows the payments to continue for as long as either you
or your spouse will live.
What other advantages does this annuity provide?
An income annuity can provide protection against losing retirement savings if stock
market performance declines. Regardless of the ups and downs of the financial markets, you can be confident that
your annuity income is locked in and guaranteed. Additionally, with this product you set aside a reasonable part
of your assets to help cover future living expenses. Monthly income, should you choose this payment option, makes
it easier for you to stay on budget, and to ensure your basic needs such as food, housing and health care are
covered.
What is the rate of return on an income annuity?
A Lifetime Income Annuity is not an investment that provides you with a rate of return
over a fixed period of time. Rather, this annuity is an income product that provides you with fixed monthly
income that is guaranteed for life … no matter how long you live … and no matter how the markets
perform. The total payout you receive from this income annuity will be largely determined by your own longevity.
The longer you live, the more income you will receive.
How soon can payments begin?
Income payments generally begin one payment period after the policy date. If you choose
to receive a monthly income, your payments will begin one month after the policy date, whereas if you choose to
receive a quarterly income, payments will begin three months after the policy date. You may select the start
date for receiving payments, but payments must begin within one year of the policy issue date.
Are there age or health restrictions?
Age 80 years old is the maximum allowed for any Life Only payout option. Ages 81 to 95
are for any payout option with a Return of Premium or a Period Certain of 10 years or more.
What kind of funds can I use to purchase an income annuity?
To fund your annuity, you may want to use a portion of your checking or savings accounts,
CDs, mutual funds, or inheritances. Transfers of certain retirement accounts, such as your IRA, 401(k) or
lump-sum pension plan payout are eligible for this annuity.
How much of my money should I use for an income annuity?
You can purchase an income annuity with any amount of $25,000 or more. Premium payments
of over $500,000 requires prior American Savings Life Insurance Company approval.
What happens to my money if I pass away prematurely?
Unlike some income annuities, one of the payment options you can select with the American Savings Life Income Annuities are a Return of Premium option that guarantees that you will not lose any of your premium. If you die
before your monthly income payments equal the full amount of your annuity purchase price, your beneficiary will
be paid the difference. Additional payout options are also available.
Can I ever withdraw more than my monthly income?
The B.E.S.T. Income Annuity will be permanently locked into the contract and can only be
returned in the form of monthly, quarterly, or annual payments.
The B.E.S.T. FLEX Income Annuity offers for potential liquidity needs a one-time lump-sum payout
which is referred to as a Commutation Value. After the completion of two full contract years, the owner may
request a one-time commutation (withdrawal) of all of the Annuity Benefits. This provision is only available
on contracts that are for a period certain or live with a period certain. The commutation provision is not
available for life only contracts. If the period certain has expired, there is not commutation (withdrawal)
value, and no proceeds will be paid. The commutation value shall be equal to a discounted present value of
any remaining guaranteed payments due under this contract, subject to a commutation charge as shown in the
schedule below:
| Policy Year |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11+ |
| Charge |
N/A |
N/A |
8% |
7% |
6% |
5% |
4% |
3% |
2% |
1% |
0% |
How can Immediate Annuities pay tax-favored
income?
If you use after-tax funds to purchase a single premium immediate annuity, the income
payments you receive may be only partially taxable. The non-taxable portion of each payment is a level
percentage that represents the return of principal over the life of the contract. Depending on your age and the
payment option you choose, this percentage will vary. If you are using tax-qualified funds (Traditional IRA,
TSA, 401k money for example) to purchase your Single Premium Immediate Annuity, the payments you receive are
generally fully taxable as you receive them because they represent funds that have not been taxed before. Roth
IRA funds are after tax funds and are generally tax exempt if payments are received after age 59½ and the
Roth IRA has been established for at least five years.
What payment options are available with an
Immediate Annuity?
Single Life: The Payee will receive payments for as long as the Annuitant lives.
Two Lives (Joint and Last Survivor): The Payee will receive payments for as long as the last surviving Annuitant lives.
Single Life with Return of Premium: The Payee will receive payments for as long as the Annuitant lives. If the Annuitant dies before the payments received equal the full premium, payments will continue until the total payments equal the full premium. The Period Certain Date shown in the Annuity Details Schedule is the date at which time the total payments will equal the full premium.
Two Lives with Return of Premium: The Payee will receive payments for as long as the last surviving Annuitant lives. If the last surviving Annuitant dies before the payments received equals the full premium, payments will continue until the total payments equals the full premium.
Fixed Period: The Payee will receive payments for a specific fixed period of years (available from 5 to 30 years).
Single Life with Period Certain: The Payee will receive payments for as long as the Annuitant lives. If the Annuitant dies before the Period Certain Date (available from 5 to 30 years), a Beneficiary Payee will continue receiving the same payments until the Period Certain Date.
Two Lives (Joint and Last Survivor) with Period Certain: The Payee will receive payments for as long as the last surviving Annuitant lives. If the last surviving Annuitant dies before the Period Certain Date, a Beneficiary Payee will continue receiving the same payments until the Period Certain Date.