1 Is Your Retirement Plan on Target? To protect long-term savings in today s volatile market, consider a traditional safety net: annuities. In partnership with:
2 When it comes to financial planning, it s tough to find guarantees. Yet that s exactly what lots of investors are seeking as they watch their portfolios shrink amid the ongoing market turmoil. Many are turning to annuities, a traditional insurance product that can be adapted to meet a wide range of financial needs. The attraction: Annuities are one financial instrument that comes with guarantees. People purchase annuities for safety and security, says Kim O Brien, executive director of the National Association for Fixed Annuities (NAFA), noting that in 2007 people bought nearly $260 billion in annuities of all types. At its heart, an annuity is an insurance contract. Under a fixed annuity, guaranteed payments to the owner are set in advance, eliminating all investment risk. With a variable annuity contract, however, that risk is shifted to the buyer, and payments will vary according to the performance of the underlying investments. What can annuities do for you? Using today s annuity products, you can get a five-year contract with a guaranteed interest that s higher than current bank CD rates. Or you can guarantee a stream of income to be used now or deferred until your retirement years. You can have that income stream last for the rest of your life, if you want, and even have it cover your surviving spouse s lifetime. Or you can use an annuity to create a tax-deferred account that mimics your IRA or 401(k), to create a nest egg for your retirement. People purchase annuities for safety and security. Know Your Options But annuities come with restrictions and limitations, so it s important to do your homework. Fixed annuities, which provide the strongest guarantees, are also the fastest-growing segment of the market right now. When you buy a fixed annuity, you ll know the minimum income you can expect and how long that income stream will last, says NAFA s O Brien. One type of fixed annuity the multi-year guaranteed annuity looks a lot like a bank CD, but it has some additional advantages, says Ken Nuss, CEO and founder of AnnuityAdvantage. com, an online service that allows investors to compare a range of fixed-annuity products. For one thing, the interest is typically higher. A five-year CD-type annuity, for example, recently provided a return of 5.3%, says Nuss, noting that the average for a comparable bank CD was just 4.19%. There is almost always a yield advantage with annuities compared to bank CDs, he says. One reason is that interest earned within that CD-type annuity isn t taxed until the money comes out of the annuity. Fixed annuities come in a variety of other forms, as well. An immediate annuity provides a guaranteed stream of income that starts within a year of the contract purchase. Those who want that income to kick in later perhaps upon retirement can purchase a deferred annuity. And those who don t want to completely turn their backs on the financial markets can buy an annuity with a fixed minimum return that pays interest based on the changes of a specific market index. S
3 No initial sales charge 1 and 40% lower annuity costs Roll over to guaranteed income for life. Fidelity Growth and Guaranteed Income. 2 It s simple. 3 When you roll over old 401(k) assets into Fidelity s new deferred variable annuity, you get guaranteed 4 lifetime income that won t go down if the market does. And it offers two investment options to choose from. It s low cost. Unlike many industry annuities, ours doesn t carry a guaranteed minimum death benefit. It s one reason our annual annuity charge is 40% lower than the industry average. 5 CALL CLICK Fidelity.com/annuities to open an account online VISIT Investor Centers located nationwide Before investing, consider the investment objectives, risks, charges, and expenses of the annuity and its investment options. Call or write to Fidelity or visit Fidelity.com for a free prospectus containing this information. Read it carefully. Annuities are subject to investment risk. Your principal value may decline. 1 A 2% surrender charge may apply during the fi rst fi ve contract years. 2 Fidelity Growth and Guaranteed Income (Policy Form No. DVA-GWB-2007, et al.) is issued by Fidelity Investments Life Insurance Company. In New York, Growth and Guaranteed Income (Policy Form No. EDVA-GWB-2007, et al.) is issued by Empire Fidelity Investments Life Insurance Company, New York, N.Y. Fidelity Brokerage Services, Member NYSE, SIPC, and Fidelity Insurance Agency, Inc., are the distributors. 3 Before purchasing an annuity with 401(k) assets, you should evaluate how the annuity and 401(k) compare with respect to benefi ts, fees, and choice of investment options. 4 Guarantees are subject to the claims-paying ability of the issuing insurance company. 5 According to Morningstar, Inc., Fidelity Growth and Guaranteed Income s annual annuity charge of 1.25% for joint lives is approximately 40% lower than the industry average annual annuity charge of 2.05% for deferred variable annuities offering guaranteed withdrawal benefi ts for life as of 5/31/07. Insurance products are issued by Fidelity Investments Life Insurance Company (FILI), and in New York, by Empire Fidelity Investments Life Insurance Company, New York, N.Y. FILI is licensed in all states except New York. The contract s financial guarantees are solely the responsibility of the issuing insurance company
4 Tax-deferred growth is the primary appeal of variable annuities. They look much like a 401(k) or an IRA, but aren t subject to retirement-plan annual minimum-distribution rules. Unlike the fixed annuity, the variable product gives the investor a choice of investment options. That means the stream of income or the lump-sum payout eventually produced by the annuity will depend on how well that option performs. Such market exposure is important despite the inherent risks. With retirement now commonly stretching 20 or even 30 years, people can t afford to abandon equity markets, says Joan Bloom, executive vice president at Fidelity Investments Life Insurance Co. You need to stay in the equity market to get some growth, she says. Products in Vogue These days, there are variable products designed to eliminate even that risk. Take, for example, Fidelity Investment s Growth and Guaranteed Income Annuity. It not only locks in an annual lifetime income distribution but also lets people benefit from growth in the equity markets by investing in a balanced mutual fund. Check the Rates Multi-year guaranteed annuities typically offer a yield advantage over bank certificates of deposit.* Annuity 5.3% Bank CD 4.19% Source: AnnuityAdvantage.com and Bankrate.com, *9/12/08 rates This protection, of course, isn t free. The guaranteed product costs about 85 basis points per year more than Fidelity s straight variable annuity, Bloom says. Investors may see their income stream rise with the market, but the extra insurance fee means that it won t ever fall below the guaranteed withdrawal. How much income will such an annuity produce? Buy a $100,000 annuity at age 60, and you re guaranteed $5,000 a year for life. If the market goes up, so will that income. Before buying, consumers need to fully understand the impact of additional fees, surrender charges, and other contract restrictions. Technology is starting to make that task easier, expanding the amount of online information available on current annuity products, says NAFA s O Brien. We encourage consumers to go to the web to compare charges, fees, and liquidity options, she says, to make sure they find the product that suits them best. To advertise in our Annuities sections, contact Linda Lydon at For reprints, call Jo Mattern at Online Annuity Guide Buying annuities has never been easier. That s because AnnuityAdvantage.com s online marketplace lets you research and compare hundreds of CD-type, fixed, immediate, and equity-indexed annuities, all from top insurance companies. With a few clicks of the mouse, you can check out important features like yield, surrender charges, and the quality of the insurer. There s also background information on annuities, which can help you find the right product. When you re ready for more personalized attention, licensed annuity specialists at AnnuityAdvantage.com will work with you to answer questions, provide individualized recommendations, and guide you through the buying process. There are never any upfront fees, loads, or sales charges when purchasing annuities through AnnuityAdvantage.com. Call for free quotes and advice. S
5 Annuity owners can relax, knowing their retirement money is secure. Your goal in retirement may be to give yourself a stream of guaranteed income, or to pass on a lasting legacy to your loved ones. Fixed annuities can provide important financial security while they help you reach your goal. Here is what some real annuity owners have to say about their fixed annuities: I learned about indexed annuities from a trusted source an agent whom I ve known for more than seven years and he knows and understands my financial needs and concerns. [My agent] took the time to listen before selecting an insurance product that s right for me. Ms. O. W. An indexed annuity was the right choice for me. My principal can never lose value, and I can choose to receive a guaranteed stream of income if I need it. That provides peace of mind and security, no matter what happens on Wall Street. Mr. A. J. Fixed annuities can help provide stable retirement income by guaranteeing your principal and interest. Fixed indexed annuities may also provide additional credited interest based on positive market changes. Talk to your professional insurance agent today to see if fixed or fixed indexed annuities are a smart choice for your secure retirement. All guarantees are based on the financial strength and claims-paying ability of the issuing company. Consumer quotes on file. National Association for Fixed Annuities Securing the Future! NAFA was created to promote the awareness and understanding of fixed annuities, including declared-rate, indexed, and payout products. It is the only independent, non-profit organization dedicated exclusively to these unique insurance products.