Like all fixed index annuities (FIAs), Delaware Life Target Income 10 offers growth potential and principal protection—plus a choice of income options when you’re ready to retire.
The Retirement Planning Challenge: Creating Income That Lasts
Retirement will likely be a time to do the things that you never got a chance to do when you were working—all the activities, projects, and adventures you put off while you were building a career, raising a family, and paying a mortgage. But …
- Will you have the money you need to do all the things you’re looking forward to when your regular paycheck goes away?
- Do your tax-deferred savings have the potential to keep growing without taking on too much risk?
- When you finally do retire, will you want a steady stream of income to carry you through your entire retirement, which could last 25 years or more?
Annuities Can Help You Save Now—and Provide Income Later
Americans are living longer on average than ever before.
But living longer means you’ll need your retirement savings to last longer too.
Annuities are a practical, no-nonsense way to supplement your other tax-deferred savings today and are intended to 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.
Fixed Index Annuities: Pursue Growth and Protection While You’re Saving
A fixed index annuity offers:
- Guaranteed Principal
- Growth Potential
- Retirement Income Options
As you focus on saving for retirement, the challenge is to find ways to both grow and protect your money, especially in times of economic and market uncertainty.
A fixed index annuity can help you meet that challenge.
In its simplest form, a fixed index annuity (FIA) is a long-term contract with an insurance company that is designed to:
- Protect the money you put into the contract (your principal)
- Offer the potential for your money to grow tax-deferred
- Pay interest based on the performance of the market index(es) that you select Guaranteed principal Growth potential Retirement income options
Plus, all FIAs offer:
- A guaranteed death benefit so your beneficiaries receive at least the value of your account
- Access to a portion of your cash value every year
Income When You Retire
When you’re ready to retire, an FIA gives you three ways to turn your savings into retirement income:
- You can take withdrawals when you need them from the cash value of your annuity contract.
- You can “annuitize” your contract value into a series of guaranteed payments for life or for a specified period, for you and (if you purchase a joint contract) your spouse.
- If you have purchased a guaranteed lifetime income option, you can withdraw a specified level of income for life—even if your account value goes to zero.
How an FIA works
An FIA pays you interest that is based on the performance of the market index(es) that you choose.
Different FIAs use different methods to calculate their interest credits, and there may be limits to the amount you receive.
Delaware Life Target Income 10: Features and Benefits
The optional Guaranteed Lifetime Withdrawal Benefit (GLWB) rider available with Target Income 10 which really boosts the value of this annuity.
This extra rider, available for an additional fee, accelerates your accumulation of income benefits by:
- Adding a 10% bonus to your benefit base for all premiums you pay during the first year of your contract. The benefit base is not a cash or surrender value or death benefit and is not available as a lump sum.
- Growing the benefit base by 9% each year for the first 10 years—on top of any interest credited
The Longer You Wait, the Greater Your Guaranteed Annual Income Can Be
Then, the longer you wait to begin taking payments, the greater your retirement income payments will be because the GLWB rider increases your payout rate over time.
And your annual withdrawal rate is guaranteed to last for the rest of your life.
Adding the GLWB Rider can be a simple—and smart—way to increase the value of your annuity contract when you retire.
Remember: The benefit base that increases with the rider is only used to calculate your retirement income payments and the rider fee.
It has no cash or surrender value and is not available as a lump sum.
The fee for this rider may also reduce your annuity’s cash value and growth potential over time.
The optional GLWB Rider can only be purchased with a new annuity contract.
Index Choices to Help Your Annuity Grow
Target Income 10 has the potential to build cash value based on the performance of the interest rate options you select.
When you choose, remember that you can:
- Pick more than one strategy to diversify your sources of interest.
- Change your selection(s) at the end of the crediting method term if your needs, goals or risk tolerance shifts over time.
S&P 500 Index
The S&P 500 Index option may be a good choice for those who want to earn interest based on the performance of a range of large U.S. businesses.
The index is widely regarded as a premier benchmark for the domestic stock market.
It contains stocks from 500 leading companies in various industries.
Fixed Account
Payments allocated to this option will be credited with a fixed interest rate that is specified on the date the contract is effective.
Each year, Delaware Life will declare new interest rates to reflect current conditions, but never less than a minimum guaranteed rate.
If you want more certainty about the amount of interest that will be credited to your account value, this may be the choice for you.
Morgan Stanley Global Opportunities Index
This index uses a rules-based multi-asset strategy and a trend-following methodology to make allocations to global equities, interest rates and commodities.
This approach diversifies risk and balances exposure to various market risk factors to reduce the portfolio’s natural volatility.
The index is managed to a 5% target volatility over the long term and may also include a cash allocation to reduce overall volatility.
CROCI Sectors III USD 5.5% Volatility Control Index
This index, sponsored by Deutsche Bank, represents an array of global equity/stock markets and selected industry sectors, balanced by a cash component to help limit overall volatility.
It offers a significant amount of global exposure because the index tracks stocks in the U.S., Europe, and Japan.
Protection from Downside Risk
Target Income 10 includes an annual reset feature that “locks in” any interest earnings.
Your annuity’s “contract term” is based on the date you purchased the contract (your contract anniversary).
The reset feature means that the ending index value of each contract term becomes the beginning index value of the next contract term.
That value is used to calculate the interest credit amount that is credited to your selected strategies at each contract anniversary and is locked in.
This means:
- The interest you earned is credited on each contract anniversary
- Your credited interest is “locked-in” and cannot be lost due to market downturns
- Your credited interest will never be less than 0% – even if the interest option you choose had a negative return
So even if the market stayed flat or went down, you don’t have to worry about whether the value of your retirement savings will be diminished.
More Benefits While You’re Saving
Tax Deferral
Because the earnings in an annuity are tax-deferred until withdrawn, you pay no taxes on any interest that compounds over time—until you take it out for your future retirement.
At that point, your tax bracket may be lower.
But remember all withdrawals are taxed as ordinary income and, if taken prior to age 59½, may incur a 10% federal tax penalty.
Guaranteed Death Benefit
If you die before you begin receiving annuity income payments, Target Income 10 guarantees that your beneficiaries will receive the full account value (including any interest you’ve earned) and may avoid probate.
Minimum Guaranteed Surrender Value
If you cash in or “surrender” your contract early (before the contract’s 10-year maturity date) you will be subject to surrender charges based on the surrender charge schedule in your contract.
However, your contract’s value (“surrender value”) will never be less than 87.5% of premiums paid plus interest earned at the minimum guaranteed rate stated in the contract, minus any withdrawals you’ve taken.
Access to Your Money
During the first 10 years of your annuity contract, you can withdraw up to 10% of the value of your annuity account each year without paying any extra “early surrender” charges.
You also can take fee-free withdrawals for required minimum distributions (RMDs) and money to pay for nursing home or hospice care (subject to state availability and restrictions).
Any early withdrawals taken in excess of these amounts will be subject to the surrender charges specified in your contract.
They also reduce your future retirement earnings potential and may result in a market value adjustment to your surrender value, depending on how interest rates have changed since you first purchased your annuity (not applicable in every state).
After 10 years, you can take withdrawals of any amount without surrender fees.
But remember: The taxable portion of any withdrawal- is taxed as ordinary income and you may have to pay a 10% federal tax penalty if you are younger than age 59½.
Options for Income When You Retire
When you transition to retirement, Target Income 10 gives you the flexibility to receive income in several ways.
You choose the income option that best suits your situation, including:
- Guaranteed Income for Life with the GLWB Rider: If you purchased the optional Guaranteed Lifetime Withdrawal Benefit (GLWB) rider, you (or you and your spouse) will receive a guaranteed level of retirement income payments for life, even if your annuity’s cash value drops to zero.
- Regular Annuity Payments: If you choose to “annuitize” your contract, you can select from several annuity payout options, including income for life or for a specified period, for you and your spouse (if you purchase a joint contract).
- Systematic Withdrawals: A series of regular, periodic payments based on the amount you specify.
- Withdrawals As You Need Them
Remember…
Target Income 10 is not invested directly in the stock market or in any securities.
Instead, your account receives interest credits based on the performance of the indexes you’ve selected.
The method used to calculate these interest credits varies from index to index.
It also may be limited by a “cap,” a “participation rate” or a “spread.”
