Annuitization Payment Options

Transcription

1 Annuitization Payment Options

2 Annuitization Payment Options Table of Contents What is Annuitization?...Page 1 Life-Only Option...Page 3 Certain Only Option...Page 3 Life with Period Certain Option.Page 4 Life with Installment Refund...Page 5 Joint and Survivor Life Option...Page 5 Joint and Survivor with Period Certain Option...Page 6 Joint and Contingent Life Option...Page 8 Joint and Contingent with Period Certain Option...Page 9 Lump-Sum Distribution Option (for Deferred Annuities only)...page 11

3 What Is Annuitization? Annuitization is a the act of converting the accumulated balance of your Deferred Annuity or the lump sum payment for your Single Premium Immediate Annuity (SPIA) into periodic income payments. You have several payment options available, which are described in this brochure. Please read these options carefully before selecting your annuitization option. Once you choose to annuitize, the payment schedule and amount is fixed and cannot be altered. For this reason, you may want to consult your financial professional or tax advisor before selecting a payment option. All guarantees are based upon the claim-paying ability of the issuer. How Does My Deferred Annuity Contract Change Once I Annuitize? Once you annuitize, this ends the accumulation phase and the benefits that go along with it and begins the distribution phase of receiving income in the form of periodic payments. If you decide to annuitize your annuity contract, the total value of your contract less any applicable contract charges and fees will apply to the payment option you select. For details on when or if any charges will apply, please refer to your annuity contract or prospectus. Please Note: If you have a variable annuity contract with a living benefit or enhanced death benefit rider, you may lose those elected benefits by annuitizing. For additional information on your elected benefits, please see your contract or the prospectus. 1

4 It is important to weigh your options carefully since once you select your payment option and payments begin, you may not change your payment options. Please consult your financial professional or tax advisor if you have any questions prior to making a decision to annuitize. Are There Additional Issues to Consider? Several factors can impact your payments, so please consider the following when deciding on your payment option: Certain payment options may require a minimum contract value or minimum periodic amount. The minimum contract value for annuitization is $5,000. Monthly payment options require a minimum payment of $50 per month. If your monthly payment is less than $50 per month, a less frequent payment option must be selected. Certain payment options may not be available based on your age and life expectancy as defined by the IRS Life Expectancy Tables. * For Deferred Annuity contracts that are less than two years old, additional charges or fees may apply when annuitizing. Please check your contract and prospectus for details. Annuity payments may be taxable. Be sure to speak with a tax advisor or the IRS if you have questions regarding the taxability of the annuity payments. * IRS Life Expectancy Tables are available in IRS Publication 939, Tables V and VI, which can be found at 23

5 What Are My Payment Options? 1: Life-Only Option Provides periodic payments guaranteed for the lifetime of the annuitant. Upon the death of the annuitant, payments will cease and there are no payments made to a beneficiary. Linda chooses the Life-Only Option and is receiving payments of $2,300 per month for the rest of her life. Upon her death, these payments will cease. 2. Certain-Only Option Provides periodic income payments for a guaranteed period ranging from 5 to 30 years. The guaranteed period may not exceed the annuitant life expectancy as defined by the IRS Life Expectancy Table. If the annuitant dies prior to the end of the guaranteed period, payments will continue to be paid to the designated beneficiary/ies until the end of the guaranteed period. The beneficiary/ies may elect to receive a commuted value lump-sum payment instead of the remaining periodic payments. Steven chooses a Certain-Only Option with a guaranteed period of five years and is receiving $5,200 per month. Unfortunately, Steven dies after receiving three years of monthly payments. For the remaining two years, Steven s beneficiary/ies will continue to receive $5,200 per month. After that time, payments to the beneficiary/ies will cease. 23

6 3. Life with Period Certain Option Provides periodic income payments for the lifetime of the annuitant, which are guaranteed for a period of time. This guaranteed period of time is called the period certain and ranges from 5 to 30 years. The period certain selected may not exceed the annuitant life expectancy as defined by the IRS Life Expectancy Table. If the annuitant dies prior to the end of the period certain, payments will continue to be paid to the designated beneficiary/ies until the end of the period certain. Or, the beneficiary/ies may elect to receive a commuted value lump-sum payment instead of the remaining periodic payments.** If the annuitant lives longer than the period certain, payments will continue until the annuitant dies, and there are no beneficiary/ies benefits. Janet chooses a Life with Period Certain Option with a guaranteed period of ten years and is receiving $3,400 per month. Unfortunately, Janet dies after receiving only four years of monthly payments. For the remaining six years, Janet s designated beneficiary will continue to receive $3,400 per month. After that time, payments to the beneficiary will cease. ** Commuted Value is the present value of any scheduled future annuity payments. Please note that the commuted value will be less than the sum of the remaining annuity payments. 45

7 4. Life with Installment Refund Option Provides periodic payments for the lifetime of the annuitant, with a guarantee that payments will continue until the total payments are equal to the initial investment amount. At the time the benefit begins, a guaranteed minimum number of payments are calculated based on the guaranteed amount. If the annuitant dies prior to the end of the guaranteed period, the beneficiary will receive the remaining guaranteed payments. The beneficiary/ies may elect to receive a commuted value lump-sum payment instead of the remaining periodic payments. Bill chooses the Life with Installment Refund Option and is receiving $500 per month, guaranteed for his lifetime or until the total payments are equal to the initial investment amount. Based on the initial investment of $75,000, the guaranteed minimum number of payments is 150 ($75,000/$500). Unfortunately, Bill dies after receiving only 40 payments. Bill s designated beneficiary will continue to receive $500 per month for the remaining 110 guaranteed payments. After that time, payments to the beneficiary will cease. 5. Joint and Survivor Life Option Provides periodic income payments for the lives of two annuitants. This payment option is calculated based on the joint life expectancy of the two annuitants as defined by the IRS Life Expectancy Table at the time benefit payments begin. 45

8 Upon the death of either annuitant, and based on the percentage initially selected, payments will either continue at 100% or reduce to a certain percentage (50%, 66 2 /3% or 75%) of the original benefit amount for the lifetime of the surviving annuitant. After the deaths of both annuitants, payments cease and there are no payments to beneficiary/ies. Jill chooses Joint and 50% Survivor Life Option and is receiving $2,800 per month. The Survivor annuitant is her husband Stan. If either Jill or Stan dies, the monthly payment will decrease to 50% or $1,400. This monthly payment will continue to be paid to the living spouse for the remainder of his or her lifetime. Upon the death of the last spouse, payments will cease. 6. Joint and Survivor with Period Certain Option Provides periodic income payments for the lives of two annuitants, which are guaranteed for a period of time. This guaranteed period of time is called the period certain and ranges from 5 to 30 years. The period certain selected may not exceed the joint life expectancy of the two annuitants as defined by the IRS Life Expectancy Table. This payment option is calculated based on the joint life expectancy of the two annuitants at the time benefit payments begin. Upon the death of either annuitant, payments will continue to be paid to the surviving annuitant until the end of the guaranteed period. After the guaranteed period ends and based on the percentage 67

9 initially selected, payments will either continue at 100% or reduce to a certain percentage (50%, 66 2 /3% or 75%) of the original benefit amount for the lifetime of the surviving annuitant. If both annuitants die prior to the end of the guaranteed period, payments will continue to be paid to the designated beneficiary/ies until the end of the guaranteed period. The beneficiary/ies may elect to receive a commuted value lump-sum payment instead of the remaining periodic payments. Alan chooses Joint and 75% Survivor Option with a guaranteed period of 15 years and is receiving $2,500 per month. The joint annuitant for this contract is his wife Michelle. If either Alan or Michelle dies before the end of the 15-year guaranteed period, the monthly payment will continue to be $2,500 until the end of the guaranteed period. It then reduces to 75% of the original payment for their lifetime. If either Alan or Michelle dies after the 15-year period ends, payments will decrease to 75% of the original monthly payment ($1,875). This monthly payment will continue to be paid to the surviving spouse for the remainder of his or her lifetime. If both spouses die prior to the 15-year guaranteed period, payments will continue at the full amount ($2,500) to the designated beneficiary/ies until the end of the 15-year guaranteed period. 67

10 7. Joint and Contingent Life Option Provides periodic payments for the life of two annuitants. One annuitant is known as the Primary and the other annuitant is known as the Contingent annuitant. Upon the death of the Primary annuitant and based on the percentage initially selected, payments to the Contingent annuitant will either continue at 100% or reduce to a certain percentage (50%, 66 2 /3% or 75%) of the original benefit amount for the lifetime of the Contingent annuitant. If the Contingent annuitant dies prior to the Primary annuitant, the Primary annuitant continues receiving the original benefit amount for the rest of his or her lifetime. This payment option is calculated based on the joint life expectancy of the Primary and Contingent annuitants at the time benefit payments begin. There are no payments to beneficiary/ies with the Joint and Contingent Life Option. Donald chooses Joint and 50% Contingent Life Option and is receiving $4,800 per month. Donald s Contingent annuitant is his wife, Lisa. Unfortunately, Donald passes away. Lisa receives the monthly payment which decreases to 50% of the original monthly payment ($2,400). This monthly payment will continue to be paid to Lisa for the rest of her lifetime. When Lisa passes away, monthly payments will cease. If Lisa passed away prior to Donald, the original payment amount of $4,800 would continue to be paid to Donald for the rest of his life. 89

11 8. Joint and Contingent with Period Certain Option Provides periodic payments for the life of two annuitants one known as the Primary annuitant and the other known as the Contingent annuitant. The periodic payments are guaranteed for a period of time. This guaranteed period of time is called the period certain and ranges from 5 to 30 years. The period certain selected may not exceed the joint life expectancy of the two annuitants as defined by the IRS Life Expectancy Table. This payment option is calculated based on the joint life expectancy of the Primary and Contingent annuitants at the time benefit payments begin. Upon the death of the Primary annuitant, payments will continue to be paid to the Contingent annuitant until the end of the guaranteed period. After the guaranteed period ends, and based on the percentage initially selected, payments to the Contingent annuitant will either continue at 100% or reduce to a certain percentage (50%, 66 2 /3% or 75%) of the original benefit amount for the lifetime of the contingent annuitant. If the Contingent annuitant dies prior to the Primary annuitant, the Primary annuitant continues receiving the original benefit amount for the rest of his or her lifetime. If both annuitants die prior to the end of the guaranteed period, payments will continue to be paid to the designated beneficiary/ies until the end of the guaranteed period. The beneficiary/ies may elect to receive a commuted value lump-sum payment instead of the remaining periodic payments. 89

12 8. Joint and Contingent with Period Certain Option Continued Carol chooses Joint and 100% Contingent with a guaranteed period of 20 years and is receiving $1,800 per month. Carol s Contingent annuitant is her mother Irene. Unfortunately, Carol passes away. Irene receives the monthly payment at 100%, or $1,800. This monthly payment will continue to be paid to Irene for the rest of her lifetime. If Irene passes away prior to the 20-year guaranteed period, monthly payments will continue to the designated beneficiary/ies until the end of the 20-year period. If Irene passes away prior to Carol, the original payment amount of $1,800 will continue to be paid to Carol for the rest of her life. If both Carol and Irene die prior to the 20-year guaranteed period, payments will continue to the designated beneficiary/ies until the end of the 20-year guaranteed period. 1011

13 Additional Option Available for Deferred Annuities In addition to the options listed above, a Lump- Sum Distribution is available as an option for Deferred Annuity contracts. Lump-Sum Distribution Option Pays out the full value of the Deferred Annuity contract in a single, lump-sum distribution, less any applicable contract fees and surrender charges. John chooses to take a lump-sum distribution of his deferred annuity contract. He receives a check for $158,755, which is the current value of his contract minus the applicable surrender charges and/or fees. Which Option Is Best for Me? Please read these payment options and examples carefully before selecting your annuitization option. Once you choose to annuitize, the payment schedule and the payment amount are fixed and cannot be altered. Therefore, you may want to consult your financial professional or tax advisor before selecting a payment option. How Do I Elect a Payment Option? After determining your payment option, you can elect the option by contacting Producer and Client Services at Our representatives are available Monday through Friday, between the hours of 8:30 a.m. and 6:00 p.m. (EST). 1011

14 Can I Change My Beneficiary Designation? The owner can change a beneficiary designation at any time during the annuitization phase of the contract. Please contact Producer and Client Services at to make a beneficiary change. What If I Don t Want to Annuitize My Contract? Under certain circumstances, you can defer the maturity date of your contract. Please consult with your financial professional, tax advisor or a service representative to discuss your maturity date. How Do I Get Additional Information? If you have any questions, please contact your financial professional or call Producer and Client Services at Our representatives are available Monday through Friday, between the hours of 8:30 a.m. and 6:00 p.m. (EST). 12

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16 Investors should consider the investment objectives, risks, charges, and expenses of a variable insurance product carefully before investing. Please carefully read the prospectuses for the relevant variable insurance product and its underlying investment options, which contain this and other information about the product. You can obtain a prospectus from your Penn Mutual financial professional or go to com. Penn Mutual s Variable products are principally offered through Hornor, Townsend & Kent, Inc., (HTK), Registered Investment Advisor, Member FINRA/SIPC, HTK is a wholly owned subsidiary of The Penn Mutual Life Insurance Company. This brochure and any examples within it are for illustrative purposes only. If there is a conflict or inconsistency between the language of this brochure and your Penn Mutual annuity contract, the terms of your contract will govern The Penn Mutual Life Insurance Company, 8/10 Philadelphia, PA A8JC PM1397