Stages of Annuity Investments Arkansas

Technically, every annuity has two phases: accumulation and income. During the accumulation phase, you put money in the annuity account (paying all at once or making a series of payments), and it grows tax-deferred. During retirement, you initiate the income stage by converting it to an irrevocable income stream.

In practice, it usually doesn't work that way. Most people who buy deferred annuities never formally convert them to income; they just take withdrawals during retirement. And a handful of people buy immediate annuities after age 59-1/2 and start receiving income right away.

The purchase stage described below isn't an "official" contract stage. It's added to the beginning of the cycle to articulate the initial steps in acquiring an annuity.

1. The purchase stage (typically starting at age 45 or so):

• Meet with a trusted agent/broker/adviser to explain your needs; give her time to research the annuity products available in your state.
• Study the various prospectuses or brochures your broker obtains from the wholesaler, broker-dealer, or carrier; choose the best product.
• Fill out the contract application; if it's a deferred variable annuity, choose the subaccounts (mutual funds), riders (options), and services you want.
• Wait while your application is submitted to the insurance company for approval.
• Sign the approved application and provide a check for the purchase premium.

2. The accumulation stage (lasting from purchase until after age 59-1/2):

• Manage your subaccounts. If it's a deferred variable annuity, make periodic contributions; if it's a fixed annuity, wait until the term ends and, if you want, roll it into a new contract.
• Take withdrawals if necessary, knowing that withdrawals may be subject to a surrender charge, income tax, and a 10-percent federal penalty tax if you are under age 59-1/2.
• If you purchased a "guaranteed accumulation benefit," watch to see whether your account value surpasses or falls short of it. If your account balance falls short, you can exercise your option to take the guaranteed amount.

3. The income or distribution stage (starts at age 59-1/2 and lasts indefinitely). Do only one of the following:

• Take withdrawals from your contract as needed without converting the assets to a guaranteed irrevocable income stream.
• Exercise your guaranteed withdrawal benefit, if you purchased one, to receive a guaranteed income for life while maintaining access to your money.
• Convert your annuity assets to a fixed or variable guaranteed income stream for one of the following: life; either of two lives; or a certain period.
• Transfer the assets of your deferred fixed or variable annuity to an immediate income annuity and receive guaranteed income for one of the following: life; either of two lives; or a certain period.