No layman could possibly understand these contracts. I spent many years litigating and there is NOTHING favorable to you in the language. Find a better product. If you must, go to Vanguard. Shareholders own the company. Lowest cost products .
Had a Harvard lawyer review and they laughed how absurd the contract language was after reading a few pages. Caveat Emptor. Or you can trust a salesman
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Originally Posted by FredJacobs
I have spent almost 30 years teaching insurance agents.
Yes, the selling agent gets a pretty good commission. Depending on whether the product is a Variable Annuity - where the inside cash value grows on the performance of a stock/bond portfolio - or a Fixed Annuity - the inside cash value grows on an interest rate that may fluctuate. The commission rate (before I retired 20 years ago) was about 5% on Variable Annuities and about 10% on Fixed Annuities at the time of sale. Additional deposits paid 1 to 2%.
During this growth period you can withdraw cash from the account with some penalty based on declining sales charges - READ THE CONTRACT. When you withdraw cash, any growth over the amount you invested comes out first and is taxable income. It also reduces your death benefit should you pass while the annuity is in force.
At some point, you can annuitize the cash value. This is like getting an income from a pension. There many variations of annuitizing. For example, like a pension, you can get a distribution based on your life expectancy, a combination of you and your wife with various options on how much the survivor gets when you pass. These should all be explained by the selling agent before you buy. While the distributions are guaranteed by the insurance company, that guarantee is based on the health of the insurance company and its ability to continue paying.
It appears that you are considering an Immediate Annuity. Annuitization is not always the best choice for seniors. The main problem once you annuitize is that you lose access to the cash value of the contract. Should a problem come up such as needing cash for high medical bills, you cannot access any of that $265k - that money is locked. If you do not have other retirement funds and/or savings, annuitization is NOT recommended in your case. Most insurance companies will want the sales agent to submit a detailed report on the client's assets - especially those over 65.
By the way, I am not/will not recommend any company or product for your consideration. I'm just explaining how they work. I surrendered my licenses a long time ago.
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