Advantage IV Variable Annuity

Transcription

1 Advantage IV Variable Annuity

2 IT S ALWAYS THE RIGHT TIME It s never too late to get where you want to go When you begin saving for retirement at the beginning of your career, you re giving yourself the benefit of more time to create a plan for a comfortable lifestyle that you can maintain throughout your later years. Sometimes, however, time escapes us. It moves so quickly, and we often head in many different directions at once. But ultimately, most of us want to end up in the same place: retirement. Whether you are just now embarking on your career, or you ve been at it for several years, it is always the right time to make saving a priority. Saving for retirement now is one of the most important things you can do to help create financial security. Today, with people living longer and enjoying longer retirements, Social Security and pensions alone may not be enough. Now more than ever, personal retirement investments have become vital to providing meaningful retirement income. Tax-sheltered annuities can be a great place to start.

3 Save and Defer Tax-sheltered annuities (TSA) allow you to save for retirement and defer taxes at the same time. They are designed to help you accumulate assets to supplement other sources of retirement income, such as employerprovided pension plans and Social Security. When considering a TSA, keep in mind that tax deferral can be achieved through other investment vehicles funding the plan. However, a variable annuity may be appropriate for its lifetime income options, family protection through its death benefit, nursing home riders and other optional features. Convenient Contributions Contributions to a TSA can be made through convenient payroll deductions for those still working. This way, the money you wish to contribute is transferred directly from each paycheck to your annuity. You don t have to make individual deposits each pay period. You decide how much to contribute from your paycheck. You can change this amount or stop contributions at any time. Your contributions are free from federal income tax and most state income tax until withdrawn. Withdrawals are subject to income tax, and withdrawals prior to the age of 59½ may be subject to an additional 10% federal income tax penalty. Contributions are reported on your year-end W-2 tax statement as tax-deferred, subject to deferral limits. Your contributions are generally included as part of your salary for most state pension plans, so your pension benefits are not reduced. Guarantees are based on the claims-paying ability of Commonwealth Annuity and Life Insurance Company. WHAT IS A VARIABLE ANNUITY? Variable annuities are designed to help meet investment and income objectives for retirement. Contracts offer: Tax-deferred growth potential through a range of investment options from a variety of professional money managers Flexible payout options to help meet a variety of income needs Optional income, investment and legacy guarantees for enhanced financial protection Variable annuities are subject to the market fluctuations of the underlying investment options and possible loss of principal. As a result, the value, at any point in time, may be worth more or less than the amount invested. Furthermore, there are fees and charges associated with the purchase and ownership of a variable annuity, including sales charges, premium-based charges and mortality and risk expense charges. The fees and charges will affect values within the contract. IS A VARIABLE ANNUITY RIGHT FOR YOU? Variable annuities, like all investments, are not right for everyone. Your financial advisor can help you determine if one is right for you based on your personal circumstances and objectives. Considerations include your tolerance for investment risk and fluctuations, as well as the length of time you plan to hold the annuity before accessing its benefits. When properly incorporated into an overall retirement strategy, a variable annuity may offer appealing benefits. Optional benefits discussed within this material are only offered with the purchase of a variable annuity and are not available outside of the variable annuity. As such, you should first consider your suitability and willingness to purchase a variable annuity before considering the potential benefits of any optional features. Optional benefits are subject to additional fees. 2

4 Benefit of Tax Deferral In a TSA, any earnings on your contributions grow tax-deferred. As of a result of this tax advantage and the compounding of earnings, you have the potential to accumulate more money for retirement in a TSA than with a similarly performing taxable investment. TAX-DEFERRED INVESTMENT (AFTER TAXES AT WITHDRAWAL) TAXABLE INVESTMENT $216,007 Hypothetical Tax-Deferred Investment vs. Taxable Investment $138,848 $85,376 $64,985 $26,519 $23, years 20 years 30 years 10 years 20 years 30 years This chart is based on a $200 pre-tax monthly contribution to a variable annuity, assuming a hypothetical annual growth rate of 8% and a 28% tax rate applied to full value at withdrawal. The taxable account includes a $144 monthly contribution (equivalent to $200 before tax) with earnings taxed at 28% throughout the investment period. This information is for illustrative purposes only and is not a guarantee of future return. When withdrawn, gains from tax-deferred investments are subject to ordinary income tax. Lower rates on capital gains and dividends would increase the investment return of the taxable investment, thereby reducing the difference in performance between the options shown. You should consider your investment time horizon and income tax brackets, both current and anticipated, when making an investment decision. These factors, along with any changes in tax rates or tax treatment of investment earnings, may further impact the results of this comparison. This example is hypothetical and is not intended to represent the performance of any Commonwealth Annuity product. The dollar values in this example do not reflect the effects of fees and charges and, if they had, the returns would have been lower. 3

5 Developing an Investment Strategy A TSA does more than allow you to save money tax-deferred. It allows you to choose between a variety of investment strategies. Your financial advisor can help you work through the three key factors to consider when mapping out the strategy that works best for you: 1. GOALS What are your plans for retirement? Thinking about the lifestyle you want in retirement can help you determine how much you need to save and the kind of return you need on that money. Consider this: Your cost of living may be higher if you spend your time traveling or move to a more expensive part of the country. Your cost of living may be lower if you plan to relax or move to a less expensive part of the country. 2. TIME FRAME Is retirement a few short years away or decades down the road? How soon you need to start relying on your retirement savings plays a big role in the type of investments you choose. Consider this: If you re close to retirement, stable investments designed to preserve your savings may be more attractive than riskier investments with higher growth potential. If retirement is seven or more years away, you may want to take on greater risk for potentially higher returns since you have more time to overcome a downturn in the market. 3. RISK TOLERANCE What s your comfort zone? No matter how much money you need to meet your goals or how much time you have until retirement, it s important to find a level of investment risk you can tolerate. Consider this: If it doesn t bother you that your savings could vary as much as 10% or 20% over a short time, then investment options with higher risks and higher potential rewards might be right for you. If market fluctuations keep you awake at night, you may want to select less risky investment options. 4

6 ADVANTAGE IV VARIABLE ANNUITY The Advantage IV variable annuity offers you significant flexibility in designing a retirement savings strategy. With Advantage IV, you can choose from more than 60 variable investment options 1 plus enjoy the availability of a fixed account to help build your future, and a death benefit to help protect your beneficiaries. Guarantees with Flexibility The Advantage IV variable annuity includes a fixed account, which has a guaranteed minimum interest rate of 1% for the life of the contract. You can contribute up to $100,000 per year to non-qualified contracts, and up to $1 million per year for qualified contracts. You may also transfer money into and out of the fixed account. When the guaranteed minimum interest rate is set at 3% or lower, transfers into the fixed account are limited to 25% of the contract value as of prior anniversary. Transfers out of the fixed account can occur at any time, but may also be limited to 25% of the fixed account value as of prior anniversary. Access to Your Money at Retirement Because there is always uncertainty about the future, you want to be prepared for the unexpected. The Advantage IV variable annuity offers a unique benefit that gives you the potential to access your money without surrender charges. As with many annuity products, the Advantage IV variable annuity includes a surrender charge period of seven years that applies to each contribution made. However, within a qualified plan or IRA, you can access your money earlier free of surrender charge by meeting two conditions reaching age 59½ and owning the annuity contract for at least five years. This retirement liquidity feature gives you an extra level of confidence and convenience at a time when you might need it most. The important flexibility this feature provides is included when the contract is issued at no additional cost to you. It is available on all qualified contracts. Predictability Throughout Retirement The fear of running out of money in retirement is one shared by many people. Incorporating a variable annuity into your retirement strategy could be a good way to help provide yourself with a steady stream of income when you retire. Advantage IV offers several different annuitization options, as well as a maximum annuitization age that is higher than many other products. We offer: Guaranteed income for life Guaranteed income for life and joint annuitant s life Guaranteed income for a specified time period of 10 years Maximum annuitization age of 90 years Guarantees are based on the claims-paying ability of the issuing insurance company and subject to compliance with benefit rules. 5 1 Not all investment options are available in non-qualified contracts. See prospectus for details.

7 Additional Benefits and Riders Death Benefit The Advantage IV variable annuity includes a standard death benefit and offers an optional Step-Up Death Benefit Rider. Prior to age 75, the standard death benefit passes either the full contract value to your beneficiary or 100% of purchase payments (adjusted for withdrawals, less debt). After age 75, the standard death benefit defaults to the contract value (less debt, less premium taxes). Step-Up Death Benefit Rider 2 The optional step-up rider is available for an annual fee of 0.20% of the separate account contract value. This rider provides a death benefit that is the greater of either the contract value or the highest contract anniversary value prior to the oldest owner s 81st birthday (adjusted for subsequent purchase payments and withdrawals, less debt). Dollar Cost Averaging Option 3 Dollar cost averaging (DCA) allows you to take advantage of fluctuating market prices by making scheduled investments, so you can transfer a predesignated portion from a subaccount or the fixed account into a destination subaccount(s) of your choosing on a regular basis. This feature can reduce the average price of your subaccount units over time. Dollar cost averaging does not ensure a profit. You should consider your ability to continue investing during periods of low price levels. 2 Riders contain restrictions and limitations. Please see the prospectus for complete information. May not be available in all states. Restrictions may apply. 3 Because Dollar Cost Averaging (DCA) involves continuous investing regardless of fluctuating price levels, your clients should carefully consider their financial ability to continue investing through periods of fluctuating prices. Continuous or periodic investment plans neither assure a profit nor protect against loss in declining markets. No Withdrawal Charge Rider 2 The No Withdrawal Charge Rider is available for an annual fee of 0.35% of the contract value on the following qualified plans: 403(b) 457(b)gov 457(b)non-gov Disability Waiver If the contract owner has a physical or mental impairment that has lasted, or can be expected to last, for a continuous period of not less than 12 months, withdrawal charges will be waived. The contract must be in force for two years prior to the disability, and the disability must occur prior to the owner s 66th birthday. Extended Care Waiver If the contract owner is hospitalized or admitted to a skilled healthcare facility for a period of at least 90 days, withdrawal charges will be waived. The contract must be in force for two years prior to hospitalization or admission to a skilled healthcare facility. Confinement must begin prior to the owner s 75th birthday. Investment Options SEP-IRA Simple IRA 401(k) Commonwealth Annuity offers a complete line-up of investment options covering a broad array of investment styles and asset classes. We offer domestic, international, industry-specific and fixed income funds from some of the world s most recognized fund families and trusted money managers. Choosing from a variety of asset classes makes it easier to address your risk tolerance and better prepare yourself for every stage of retirement. 6

8 Asset Allocation Asset allocation is the strategy of spreading your savings across a variety of investments to help reduce your risk. The idea is to control risk and improve your total return over time. Asset allocation does not guarantee that your investments will earn more or protect against loss, but investing in different asset classes can help shield you against the possible poor performance of a single investment. 7

9 Levels of Risk Your financial advisor can discuss your personal level of risk with you in order to determine the most appropriate ways to invest your money. The typical investor, however, generally falls into one of the following categories: Conservative You re not comfortable with risk and/or don t need to be aggressive with your money. The predictable rates of return in fixed-income options bond funds, money market accounts and fixed accounts make sense for you. Moderately Conservative A measured level of risk is okay with you. A small percentage of equities can be mixed in your portfolio along with the fixed-income options. Moderately Aggressive You re somewhat cautious but in search of higher return potential. Equities, particularly large, blue-chip domestic stocks could play a big role in your portfolio. Aggressive You re looking for the highest possible return potential in spite of short-term risks. Most of your portfolio should be in equities, with a significant percentage in small cap and international stocks. Whether you re close to retiring or just beginning your career, it is important to have a retirement investment strategy that works for your specific situation. These three steps can help get you moving in the right direction. ACTION STEPS 1. Assess Determine what a comfortable retirement means to you and how much income you ll need to pursue the lifestyle you want. If you re investing in a taxsheltered annuity through work, determine how much you can afford to deduct from each paycheck. 2. Invest Select a diversified mix of investments and styles that can help you achieve your goals at the risk level you can tolerate. 3. Monitor Track the performance of your investments and work with your financial advisor to adjust your portfolio, as necessary, to help reach your goals. 8

10 Move Forward Life is an adventure and you don t always know what s around the next corner. Planning ahead can make all the difference. No matter what your age, it is time to get serious about pursuing a secure financial future. Building and maintaining a consistent savings plan and making sure that money works for you in a tax deferred manner is a sensible choice. We re here to help you put your future on the right track. Talk to your financial advisor to learn more. 9

11 10

12 Commonwealth Annuity and Life Insurance Company Commonwealth Annuity and Life Insurance Company is a leading provider of products that offer capital, risk and business solutions for insurance companies throughout the United States. The company specializes in reinsurance, restructurings and acquisitions to help carriers achieve business objectives and growth. A focus on investment and risk management, along with commitment to service, underlie Commonwealth s track record and reputation throughout the industry. The company is a subsidiary of Global Atlantic Financial Group Limited, a financial services company focused on the annuity, life insurance and reinsurance markets with $40 billion in assets and nine offices. Guarantees are based on the claims-paying ability of Commonwealth Annuity and Life Insurance Company. This material is authorized for distribution only when accompanied or preceded by a prospectus for the annuities being offered. The prospectus contains investment objectives, risks, fees, charges, expenses, and other information regarding the variable annuity contract and the underlying investments, which should be considered carefully before investing. You should read the prospectus carefully before investing money. An annuity purchased for a tax-qualified retirement account does not provide any additional tax deferred treatment of earnings beyond the treatment that is already provided by the tax-qualified plan itself. For such plans, the Contract should be purchased for other features and benefits, such as the Fixed Account s minimum interest rate guarantee, the Standard Death Benefit, the Step-Up Death Benefit, or the Annuity Options. This information is written in connection with the promotion or marketing of the matter(s) addressed in this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties. These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax or legal nature, you should consult your tax or legal counsel for advice. Taxable distributions- Withdrawals are subject to ordinary income tax and if made prior to age 59½, may also be subject to a 10% federal income tax penalty. This variable annuity contains certain fees and charges including mortality and expense charges, administrative charges, withdrawal charges and a contract fee. Annuity contracts do not represent deposits or obligations of any banking institution nor are they insured by the Federal Deposit Insurance Corporation or guaranteed by any federal government agency. Certain contract provisions and riders may not be available or may vary by state. Advantage IV variable annuity is a flexible premium fixed and variable deferred annuity issued by Commonwealth Annuity and Life Insurance Company, and underwritten and distributed by Global Atlantic Distributors, LLC. All statements qualified by final prospectus and Contract and are subject to change without notice. In the event of a conflict between this information and that contained in the prospectus and/or contract, the prospectus and contract shall prevail. CW5011 (05-16) Commonwealth Annuity and Life Insurance Company commonwealthannuity.com