What is a fixed annuity?
Fixed annuities are insurance products that, after a single initial premium payment, earn a fixed rate of interest, allowing your money to grow on a tax-deferred basis until you decide to begin receiving annuity payments. Therefore, you can expect solid, guaranteed growth as long as the funds remain in the annuity until the end of any surrender charge period.
Fixed annuities often offer multiple guarantee periods to align with your specific needs and guarantee the interest rate for the entire guarantee period you select. With fixed annuities, you can be confident that what you expect is what you will receive – which is ideal for retirement planning.
Benefits of Fixed Annuities
Income & Growth
Fixed annuities are designed to help grow your retirement income – typically at higher interest rates than those offered for financial products. With a fixed annuity, income is tax-deferred until you access it, allowing your money to grow and compound faster than products that are subject to annual income tax.
Access & Liquidity
People often purchase fixed annuities to grow their retirement savings or provide lifetime income payments – but you can also get access to your money through flexible withdrawal terms and available riders.
Since fixed annuities are contracts with insurance companies, your principal and interest are protected. And protecting your income and savings is an important step toward achieving your retirement goals.
Fixed annuities can help families plan for the next generation, providing you a way to pass assets to your beneficiaries that may help avoid the lengthy probate process.
How to Use Fixed Annuities
In today’s economy, planning for retirement— and ensuring you’re making the right decisions for your situation—is a complicated process.
Americans are living longer, and many retirees are outliving their savings. As life expectancy increases and the retirement burden shifts to individuals, there is a critical need for effective retirement solutions.
Current retirement options often fall short. Savings accounts and CDs typically offer low rates with limited benefits. And other investment options come with risks that can be especially problematic for retirement-aged individuals, including stock market volatility, interest-rate risk, and credit risk.
How Fixed Annuities Can Help Address Retirement Concerns
Fixed annuities can help retirees address some of their most common anxieties about retirement.
COMMON RETIREMENT CONCERNS
Some of the most common retirement concerns include:
- Outliving your savings;
- Managing deteriorating health;
- Social Security’s future; and
- The high cost of healthcare.
KEY FIXED ANNUITY FEATURES
Fixed annuity features that help address those concerns include:
- Income and growth;
- Access and liquidity;
- Principal protection; and
- Succession planning.
Most Americans do not prioritize retirement early enough, which is why many traditional options do not fully meet retirees’ financial needs today. Fixed annuities, however, are designed specifically to benefit those who are already retired or nearing retirement age.
Product Summary & Key Terms
Single premium deferred annuity (fixed annuity) policy with multi-year interest rate guarantee period options (“Nex MYGA”)
The guaranteed interest rate over the initial guarantee period corresponds with the guarantee period, the owner selects. Use a fixed annuity calculator to solve the rate of return.
Guarantee Period Options
3-, 5-, 7- and 10-year options
The owner can choose payout of income over a lifetime or defined period.
Related Reading: What does annuitized mean?
- 0-80 years (age last birthday of the annuitant)
- In FL: 0-75 years (age last birthday of the annuitant)
Min. $10,000 (Over $1 million with home office approval)
The policy is a contract with Ohio State Life that includes a policy schedule and outlines the policy’s terms.
Interest Crediting Method
Interest is credited daily and compounded at the end of each policy year. Interest payments and interim account balances are compounded using the normal daily interest rate and the daily account balances.
The owner (Joint Owners)
The individual(s) (or entity) who is (are) entitled to exercise the rights and privileges under the policy.
Change in Ownership
The owner can name a new owner by giving Ohio State Life written notice of the change. Upon naming a new owner, the prior owner’s ownership rights terminate, and the new owner is entitled to exercise rights and privileges under the policy.
The person(s) or entity(ies) that owner has designated to receive any death benefits payable under the policy
If the owner dies before maturity, a death benefit will be paid to the beneficiary(ies). The amount will be the cash surrender value unless the death benefit rider is selected.
The owner can withdrawal all or a portion of the policy’s cash surrender value before maturity, subject to withdrawal charges, market value adjustments, and minimum withdrawal amount listed in the policy.
Maturity & Automatic Renewals
Upon reaching the end of each guaranteed period, if the owner is alive, the policy will automatically renew for a renewal guarantee period which is the same length as the initial guarantee period. The renewal guarantee period’s credited interest rate will not be less than the minimum guaranteed interest rate shown on the policy schedule.
The owner can terminate the policy in exchange for the cash surrender value.
Contract Value & Withdrawal Charges
The single premium is shown in the policy schedule, less any premium tax and amounts withdrawn, accumulated with interest as described in the policy values provision.
Cash Surrender Value
The amount is payable if the owner surrenders the policy.
Market Value Adjustment
Under the terms of the policy, Ohio State Life adjusts the cash surrender value, death benefit, and/or withdrawal amounts during any guarantee period by a factor called the Market Value Adjustment (MVA). The MVA is based on the Constant Maturity Treasury Rate (CMT) appropriate for the guarantee period as shown on the policy schedule.
A withdrawal charge is assessed for each withdrawal before the maturity date. The withdrawal charge is determined based on the amount of time that has elapsed since the beginning of the applicable guarantee period and is calculated as a percentage of the account value at the time of the withdrawal, according to the policy’s schedule.
7-Year Surrender Charge Schedule
- Year 1: 9%
- Year 2: 8%
- Year 3: 7%
- Year 4: 6%
- Year 5: 5%
- Year 6: 4%
- Year 7: 3%
- Year 8: 0%
Access to Money & Other Benefits
Annuitization Payment Options Available
- Payments for Fixed Period of Time Option
- Life Income Option
- Life Income plus Fixed Period Option
- Payments of Fixed Amounts Option
- Joint Life Income Option
- Other Payments Option
Nursing Home Waiver of Withdrawal Charge Rider
If the owner selects the Nursing Home Rider, after the first contract year and while the policy is in force, the owner may request a partial or total surrender of the value of the annuity without withdrawal charges if the owner provides satisfactory proof that:
- The owner is confined in a nursing home continuously for at least 90 consecutive days immediately before the request; and
- The owner’s confinement in the nursing home began after the rider effective date.
- Reduction in interest rate if elected.
Free Partial Withdrawal Rider
If the owner selects the Free Partial Withdrawal Rider, after the penalty-free waiting period, Ohio State Life will waive any withdrawal charges and market value adjustment on the first withdrawal in a policy year in an amount up to the free withdrawal percentage of the account value. Reduction in interest rate if elected.
Death Benefit Feature Rider
If the owner selects the Death Benefit Feature Rider, on the death of the owner (or the death of a joint owner, if applicable) before the income date, the death benefit amount will be the account value on the date of the owner’s (or joint owner’s) death. The market value adjustment and any withdrawal charges will be waived. Reduction in interest rate if elected.
About Ohio State Life
The Ohio State Life Insurance Company is a legacy American insurance business established in 1906. Today, Ohio State Life works with product innovation partners like NexAnnuity to deliver unique annuity offerings. As a result, Ohio State Life annuity products are powered by the skills and sophistication of a multibillion-dollar global investment platform.