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Be informed
Speak with an agent and explore AAA’s diverse annuity options today.
An annuity is an insurance product offered by an insurance company where you regularly receive a fixed amount of money over a certain time period (guaranteed income annuity); withdraw funds when you decide (deferred annuity); or withdraw all of the money, plus earnings, at once (deferred annuity). Deciding on the type of annuity, premium amount and the best time to add it to your portfolio mix can be a complex formula, but the peace of mind it can provide in retirement makes it worth the effort you invest today.
Annuities fall into two broad categories: fixed and variable.
Yes. Within these broad categories of fixed and variable, there are many kinds of annuities. The one you select is based on a list of options, such as length to maturity, financial strategy and more.
An annuity is a contract with an insurance company where an individual pays premiums to the annuity either in a lump sum (immediate or deferred annuities) or a series of premiums (deferred annuity). The immediate annuity can pay out a series of payments as income, but you can only make one premium payment. That money is invested by the insurance company (like AAA Life) and grows over time by earning interest.
Annuities provide income. People who want to ensure they have cash flow during retirement may use an annuity to guarantee a set amount of money each month or year, or they can receive a lump sum payout once the annuity matures, depending on the type of annuity they select. Annuities can also be passed along directly from the insurance company to the policyholder’s beneficiaries, avoiding the probate process.
AAA Life Insurance Company requires $3,000 to start a deferred annuity (the guaranteed income annuity amount is higher), but there are some annuity providers that will start as low as $2,500. The maximum is usually $2 million. However, if a client wants to go above $2 million, additional approval and documentation will be required.
Two reasons. First, there’s an abundance of choice. There are many different kinds of annuities, so understanding the details and differences of the various products can be confusing.
For example, AAA Life offers two deferred annuity products, and understanding which is right for one individual means that clients have to do their homework. Working with a qualified agent can really help streamline the process because you’ll be able to learn from someone who’s educated about this complex subject. An agent can answer your questions and help clarify anything you don’t understand.
Second, there’s a general lack of education about what annuities are. Annuities haven’t enjoyed the same kind of PR and marketing as other options, like life insurance. In fact, people often confuse annuities with life insurance. Annuities are not short-term products, and withdrawals prior to age 59 1/2 may be subject to early withdrawal penalties.
Typically, an individual purchases a life insurance policy to provide a tax-free lump sum benefit for a beneficiary upon the policyholder’s death.
An annuity, on the other hand, can provide income to the owner/annuitant during their lifetime, typically to help with retirement. They can also provide a legacy to loved ones when the proceeds of the annuity aren’t used for income.
Insurance companies are the ultimate issuers of annuity contracts, but they are also sold through other channels like banks and brokerages. A life insurance license is required to sell fixed annuities. Some variable annuities require a securities license as well.
Dig into the differences between life insurance and an annuity.
Read moreNo, you can be any age. Selecting an annuity is often based on your financial situation and retirement goals. Generally, the age to consider a deferred annuity is 45-85, and the age to invest in a guaranteed income annuity is 18-90.
A deferred annuity allows you to withdraw up to 10% of the accumulated value annually without penalty, or you can withdraw all of the money once it matures. A guaranteed income annuity typically allows you to receive a percentage of your initial premium each year, but it does not allow a lump sum payout.
Both deferred and guaranteed income annuities require you to be age 59.5 before withdrawing funds. If you withdraw any money before then, the IRS imposes a 10% tax penalty on earnings.
Knowledge is power. AAA can help you find the right annuity.
Learn moreYes. If diversification is part of your investment strategy, then you may want to consider different types of annuities.
Think of an annuity as the foundation of the portfolio because it’s safe and secure. Once the foundation is solid, you build it up with different investments that have different risk tolerances.
The annuity products available are diverse, and this Q&A doesn’t address all of the various options and combinations. Your wisest move is to meet with an annuities or financial services agent to evaluate which options make the most sense in your situation and to ensure your goals are aligned with your investment strategy. An agent can help you figure out your best investment strategy by conducting a financial or needs analysis.
Learn more about the different annuities AAA offers in these companion articles: What Is a Deferred Annuity? and What Is a Guaranteed Income Annuity?
Be informed!
Speak with an agent and explore AAA’s diverse annuity options today.
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This information is being provided for general informational purposes only. The Auto Club Group does not assume any liability in connection with providing this information.
Life insurance underwritten and annuities offered by AAA Life Insurance Company, Livonia, Michigan. AAA Life Insurance Company is licensed in all states except NY. CA Certificate of Authority #07861. Products and their features may not be available in all states.
AAA Life and its agents do not provide legal, tax or financial advice. Please consult your professional advisor prior to the purchase of any policy or contract.
This is a summary of product provisions and does not contain all of the benefits and exclusions. For complete terms of the insurance coverage or annuity, please contact your agent or refer to the policy/contract.
Annuities - LA
Annuities are not short-term products. During the surrender charge period, withdrawals exceeding 10% will be subject to a surrender charge that may be higher than fees associated with other types of financial products and may reduce principal. Withdrawals prior to 59½ may be subject to IRS penalties, separate from the annuity’s schedule of surrender charges.
EliteGuarantee Deferred Annuity - LAEG Contract Form Series: ICC11-4101/DA-4101 (In OR: ICC11-4101)
Platinum Bonus Annuity - LAPB Contract Form Series: ICC11-4111/DA-4111 (In OR: ICC11-4111)
Guaranteed Income Annuity - LAGI Contract Form Series: ICC14-4120/SPIA-4120 (In OR: ICC14-4120)
The payout amount you will receive is based on your individual circumstances, the options you select at the time of application and your initial premium payment.
Term Life Insurance - LT
Premiums are guaranteed. They are level for the term period and increase annually thereafter. Any sample premiums are examples only and may vary based on your personal health history and underwriting guidelines. The answers provided to the health questions are used to determine eligibility for coverage. Not all applicants will qualify. Product and its features may not be available in all states. Coverage ends at age 95.
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
ExpressTerm - LTE Policy Form Series: ICC19-1601/1601 (In OR: 1CC19-1601)
Traditional Term - LTT Policy Form Series: ICC19-1801/1801 (In OR: ICC19-1801)
Group Direct Term Policy Form Series: GT8200
Individual Direct Term Policy Form Series: ICC16-1501
Universal Life Insurance – LULG
Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Lifetime Universal Life Insurance - LUL Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Policy Form Series: ICC19-4701/4701 (In OR: ICC19-4701)
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (7% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Accumulator Universal Life Insurance - LULA Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
Policy Form Series: ICC19-3701/3701 (In OR: ICC19-3701)
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (5% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Whole Life Insurance
Whole Life Insurance (for coverage amounts of $30,000 or more) - LWL Policy Form Series: ICC18-5601/5601 (In OR: ICC18-5601)
Health history, underwriting guidelines and the answers provided to health questions are used to determine approval for coverage. Not all applicants will qualify. Rates may vary.
If insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Rapid Issue Whole Life Insurance (for coverage amounts of $25,000 or less) - LRIWL Policy Form Series ICC20-7001/7001 (In OR: ICC20-7001)
Responses to the application will be used to determine approval for coverage. Not all applicants will qualify.
This Whole Life policy is referred to as graded benefit whole life insurance. If you suffer a non-accidental death within the first two years of coverage, your beneficiaries will get 100% of the base premiums you paid, plus 35%. After two years, the total amount of your coverage is paid for death due to any cause.
After the first two years of coverage, if insured is diagnosed with a terminal illness that will cause death in 12 mos. or less, up to 50% of the total benefit can be applied for, and used as insured chooses. The remaining benefit payable at death will be reduced by the Accelerated Death Benefit paid and any accrued and unpaid interest (8% annual interest rate applies). Receipt of Accelerated Death Benefits may affect eligibility for public assistance programs and may be taxable. Please consult the appropriate social service agency and seek the advice of tax counsel before applying for these funds. The Accelerated Death Benefit is not available if the terminal illness results from an intentionally self-inflicted injury. This benefit may not be available in all states.
Guaranteed Issue Whole Life Insurance - LGIWL Policy Form Series: ICC16-6301/GWL6301 (In OR: ICC16-6301)
The maximum amount of Guaranteed Issue Whole Life insurance coverage per insured is $25,000.00. Subject to age requirements and policy limit restrictions.
This Guaranteed Issue Whole Life policy is referred to as graded benefit whole life insurance. If you suffer a non-accidental death within the first two years of coverage, your beneficiaries will get 100% of the level monthly premiums you paid, plus 30%. After two years, the total amount of your coverage is paid for death due to any cause.
If you are a California resident 65 years of age or older, we are required to advise you of the following. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of this product may have tax consequences, early withdrawal penalties, or other costs or penalties as a result of the sale or liquidation. You may wish to consult independent legal or financial advice before selling or liquidating any assets and prior to the purchase of any life or annuity products being solicited, offered for sale, or sold
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