Compare Two Basic Annuity Types
An annuity is a contract you make with an insurance company. When you buy an annuity, the insurance company repays your money – with interest – as an income stream over a period of time.
Immediate Annuities: This type of annuity converts your assets into income and you start receiving payments right away – there is no accumulation period. Immediate annuities are typically used to supplement other retirement income sources while keeping pace with inflation.
Deferred Annuities: This type of annuity contract delays income or lump sum payments until the investor elects to receive them. Deferred annuities have two phases, the accumulation phase in which you invest money into the account, and the income phase in which the plan is converted into an annuity and payments are received. A deferred annuity can be either variable or fixed.
Earnings on a deferred annuity account are taxed only upon withdrawal, providing the annuity the ability to have its potential earnings grow tax-deferred.
Deferred annuities are intended as a retirement savings vehicle, while immediate annuities are intended as a way to help supplement income needs. If you take money out prior to age 59½, you may be subject to a 10% penalty. Please consult you tax advisor for more details.
Features and Benefits of Annuities
| Deferred Annuities | Immediate Payout Annuities | ||
|---|---|---|---|
| Fixed Annuities | Variable Annuities1 | Immediate | |
| Structure | Accumulation phase and payout phase |
Accumulation phase and payout phase |
Payout phase only |
Premium |
Options include single premium (one-time payment) |
Flexible premiums (several payments over time) |
Single premium only |
Interest |
Interest is paid at least a guaranteed minimum fixed rate for the life of the contract. |
The contract's Accumulated Value is subject to subaccount performance. |
Although this type of annuity doesn't have an "accumulation period", a guaranteed interest rate is earned on the portion of your assets which remains invested after your income stream begins. |
Tax considerations2 |
Earnings accumulate tax-deferred. Earnings are not taxed until they are surrendered from the contract. |
Earnings accumulate tax-deferred. Earnings are not taxed until they are surrendered from the contract. |
A portion of your income payout is interest earned on your contract and a portion is the principal of the contract. A portion of your payment or all of your payment is subject to income taxation. |
Earning |
Generally offer less investment flexibility and less opportunity for growth compared to variable annuities. |
Varies, depending on investment option performance. |
An immediate annuity is an insurance contract and is not designed as an investment tool for accumulating assets. |
Risk to principal |
Principal value never less than the sum of premiums paid less any withdrawals and applicable surrender charges. |
Principal value is not guaranteed. Accumulated Value will fluctuate, and it is possible to lose money. |
If you choose a revocable contract, you may make partial surrenders during the guaranteed period. Your entire remaining principal is not guaranteed. If you choose an irrevocable contract you do not have access to your principal. |
May be a good choice if … |
You want the |
You want greater earnings potential; however, are willing to lose value. You want a guaranteed stream of income at a later time; and like the flexibility of multiple premium payments. |
You have a lump sum you'd like to turn into an income stream, and you want your income stream to start immediately. |
Learn more about Thrivent Financial: |
Fixed annuities | Variable Annuities | Immediate Annuities |
Guarantees are backed by the financial strength of Thrivent Financial for Lutherans.
1 Investing in a variable annuity contract involves risk, including the possible loss of principal. More complete information on the investment objectives, risks, charges and expenses of the variable annuity contract and underlying investment options is included in the prospectuses, which investors should read and consider carefully before investing. Prospectuses are available from a Thrivent Financial representative or at www.thrivent.com.
2 Withdrawals or surrenders from an annuity are subject to income taxation and surrender Distributions prior to age 59½ may be subject to a 10 percent IRS premature distribution penalty.
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