Frequently asked questions

A fixed deferred annuity generally guarantees at least a minimum interest rate, and some contracts guarantee a stated rate for a defined period. A fixed income annuity guarantees the payment described in the contract. Every guarantee depends on the issuing insurance company's claims-paying ability and the contract terms.

No. An annuity is an insurance contract, not a bank deposit, and it is not insured by the Federal Deposit Insurance Corporation. State insurance regulation and guaranty association protections are different from federal deposit insurance.

The terms usually refer to relative guarantee and surrender periods, but there is no universal definition. A shorter term creates an earlier decision point; a longer term may provide rate certainty for more years while restricting access for longer. Contract dates and access rules matter more than the label.

A traditional fixed annuity is designed to protect contract value from direct market decline, but an owner may receive less than expected after early withdrawals, surrender charges, market value adjustments, taxes, or loss of bonuses and benefits. Insurer insolvency risk and inflation also remain.

The contract may renew at a new rate, enter another guarantee period, offer a withdrawal window, allow a different option, or continue under a minimum rate. The guarantee end and surrender end may not be the same date, so review the contract and renewal notice.

A market value adjustment is a contract formula that can increase or decrease the amount paid on certain withdrawals or surrenders, often based in part on changes in interest rates. It may apply in addition to a surrender charge.

A life-contingent payout option can continue payments while the covered person is alive. Joint-and-survivor options can continue while either of two covered people is alive. Payment amount, beneficiary protection, and access depend on the payout option.

A level payment does not automatically rise with inflation and may lose purchasing power. Some contracts offer increasing or inflation-related options, usually with a lower initial payment. The increase formula and guarantee should be reviewed.

No. For a nonqualified annuity, earnings generally grow tax-deferred while they remain in the contract. Taxes may be due when earnings are withdrawn or paid. An annuity inside an IRA does not add another layer of tax deferral.

Many deferred annuities allow withdrawals, but surrender charges, market value adjustments, taxes, and benefit reductions can apply. A free-withdrawal provision may permit a limited amount without a surrender charge, subject to the contract.

An exchange may change rates, benefits, costs, insurer obligations, and surrender periods. A tax-free exchange is not automatically cost-free or appropriate. Compare what will be lost and gained in writing and review compensation and alternatives.

No. Next Gen Retirement Initiative provides general financial education. This website does not sell annuities, provide quotes, rank insurers, accept applications, or recommend a specific contract.