Annuities Can Help You Save Now—and Provide Income Later
Annuities are a practical, no-nonsense way to supplement your other tax-deferred savings today and provide a source of guaranteed income in the future. They are based on a simple concept of value received and promises delivered.
Essentially, an annuity is a contract with an insurance company. And all annuities have one feature in common, which makes them different from other financial products. With an annuity, the insurance company promises to pay you income on a regular basis for a period of time you choose—including the rest of your life.
Choose an Annuity with Growth Potential in Your Comfort Zone
There are many types of annuities to choose from today and many variations within each type. If you’re saving for retirement, a “deferred” annuity that delays income payments until a future date—while giving your savings the potential to grow over time—is often a good solution.
The three basic types of deferred annuities are:
- Guaranteed annuities — with fixed interest rates
- Fixed index annuities — with interest credits based on a stock market index, you select
- Variable annuities — with returns that directly reflect the investments you choose
Because each type of deferred annuity represents a different approach to growth and risk, the one you choose should reflect your personal comfort level with taking on risk.
This brochure can help you learn more about a unique single premium deferred multi-year guaranteed annuity with a fixed interest rate: Delaware Life’s Pinnacle 3-Year MYGA.
The Benefits of a Pinnacle 3-Year MYGA
Steady returns, principal protection, and guaranteed income when you retire
Pinnacle 3-Year MYGA is a single premium deferred Multi-Year Guaranteed Annuity contract available from Delaware Life. It offers a simple, steady, guaranteed way to build retirement savings without the risk of investing in stocks, bonds, or mutual funds.
Purchasing an annuity with a single premium payment, like Pinnacle 3-Year MYGA, may be a good solution if you have a separate, large sum you’d like to protect and potentially grow to supplement your retirement income. This could be money from an IRA rollover, an insurance settlement, an inheritance, lottery winnings, a tax refund, or a large bonus check.
Pinnacle 3-Year MYGA offers:
- A Guaranteed, fixed interest rate for the period you select
- Protection of your principal
- Tax-deferred growth until you take withdrawals
- Three income payment options
One Fixed Rate of Return
Unlike other annuities with returns that can change over the life of the contract, the rate of return for your Pinnacle 3-Year MYGA contract is locked-in and guaranteed for the time period that you choose. That makes it a reliable, steady alternative to other types of annuities and investments whose value may fluctuate with changes in stock or bond markets.
Check our Delaware Life’s insurance annuity rates here.
Four Guarantee Periods
Pinnacle 3-Year MYGA is a 3-year fixed annuity. When you renew a Delaware Life Pinnacle MYGA contract, you can choose one of four guarantee periods—3, 5, 7, or 10 years—to meet your specific needs, and your interest rate is locked-in for that entire period.
Your money goes to work for you immediately, earning the specified rate for the period you select, regardless of what happens to the stock market or interest rates. As long as you hold your contract for the length of the guarantee period, your principal and the interest you earn are guaranteed.
Automatic Renewals up to Age 95
At the end of each guarantee period, you have 30 days to renew your annuity for another period of 3, 5, 7, or 10 years, ending with your 95th birthday. However, the new rate for the guarantee period you choose will be based on competitive interest rates on the date of your renewal, which may differ from your original guaranteed rate. If you do not make a choice within the 30-day renewal window, your annuity automatically renews using the same guarantee period you had previously selected. You can also make withdrawals or cash out your annuity during the 30-day renewal window without paying surrender charges or making a market value adjustment. (More on that later.)
Protection from Loss
While the money in a guaranteed annuity may earn less interest over time than if it was invested in the stock market, it’s also protected from loss. Because your principal is protected—and any earnings are tax-deferred—a guaranteed annuity could be a smart place to keep your extra retirement savings.
All the earnings in a Pinnacle 3-Year MYGA grow 100% tax-deferred until you start taking withdrawals or income payments. In most cases, that will be after retirement, when your income tax bracket may be lower.
Beginning in year two of your contract, you can withdraw up to 10% of the value of your Pinnacle 3-Year MYGA account each year free from any extra charges. But you will be charged a “surrender fee” for any amounts withdrawn in excess of the 10% limit. You also will be subject to a market value adjustment of the annuity’s value for any over-limit amounts.
It’s also important to know that:
- Surrender charges and adjustments are waived for any amounts withdrawn to meet required minimum distribution (RMD) rules if you’re older than age 72.
- Withdrawals made before age 59½ may be subject to an additional 10% federal tax penalty.
- All withdrawals are taxed as ordinary income.
Three Lifetime Income Options
At the end of your initial guarantee period, you can:
- withdraw your funds to use as you wish (with no surrender charges),
- renew your contract for a new guarantee period, or
- convert your annuity into a stream of retirement income payments, guaranteed for life, through “annuitization.”
If you choose the annuitization route, the value of your Pinnacle 3-Year MYGA account turns into a series of regular, guaranteed payments that you can choose to receive in one of three ways:
- Payments for your entire lifetime,
- Payments for your entire lifetime, with a minimum number of years of payments guaranteed to either you or your beneficiaries (a “period certain”), or
- Payments over the lifetimes of you and your spouse or co-annuitant.
In addition, if you choose to annuitize after the fifth contract year, surrender charges and the market value adjustment will be waived.
But remember: Whenever you withdraw money from your annuity, whether as a single sum or a series of regular payments, you will need to pay taxes at withdrawal.
Related Reading: How do annuities pay out?
Death Benefits for Your Surviving Spouse – and Other Beneficiaries
If you die before you begin receiving annuity income payments from your Pinnacle 3-Year MYGA, the beneficiaries you have chosen will receive the account value of your annuity, including all the interest you’ve earned, minus any adjustments for charges and taxes.
If your only beneficiary is your surviving spouse, he or she has the option to:
- Receive the contract’s death benefit proceeds, or
- Continue the contract under its current terms using the annuity’s Spousal Continuation Privileges.
Non-spousal beneficiaries may choose to receive their payouts as a single sum or a series of income payments.
Fees and Adjustments for Taking Early Withdrawals
Because excessive withdrawals of annuity account assets can affect the availability and cost of the guaranteed benefits they promise to deliver, insurance companies typically charge additional fees to discourage early withdrawals. The fees that Delaware Life charges for early withdrawals from a Pinnacle 3-Year MYGA are outlined below.
Charges for Early Withdrawals and Surrenders
As long as you hold your Pinnacle 3-Year MYGA contract until the end of the guarantee period you’ve chosen, your principal amount and the interest you earn are guaranteed.
However, if you make a withdrawal or cash in your contract before the end of your current guarantee period, you will have to pay a surrender charge on any amount you take out that is over the annual 10% withdrawal limit. Each guarantee period has its own surrender charge schedule, which decreases over the guarantee period.
The Market Value Adjustment
If you decide to make an early withdrawal of some (or all) of a Pinnacle 3-Year MYGA’s value at any time other than the 30-day window before the end of a guarantee period, Delaware Life will also make a market value adjustment (MVA) to your annuity account.
The MVA reflects the difference between the credited rate on the contract and the rates being offered on renewals. The change is measured by comparing the base interest rate credited in your contract with the interest rates being credited by the company for renewals of the same contract form and guarantee period.
If the MVA is applied, an increase in base interest rates will cause a decrease in the value of your contract, and a decrease in base interest rates will cause an increase in the value of your contract.
The MVA does not apply to annual penalty-free withdrawals, death benefit payments, or any amounts withdrawn during the 30-day window at the end of the guarantee period.