What you need to know about income annuities.
Question: How does an income annuity work?
Answer: If you are in or near retirement, you probably have some money set aside in the form of savings, CDs, mutual funds, 401(k) plans, or IRAs.
An income annuity allows you to convert part of your retirement funds into a stream of guaranteed lifetime income payments using a single lump-sum of money called a “premium,” or through flexible premium payments over time, depending on the type of product selected. In return, you receive a check from New York Life on a monthly, quarterly, semi-annual, or annual basis—guaranteed—for the rest of your life, starting when you choose it to, usually at or after retirement.
Who guarantees my income?
Your income is guaranteed by New York Life Insurance and Annuity Corporation (NYLIAC), a wholly owned subsidiary of New York Life Insurance Company. An industry leader for nearly 170 years, New York Life has earned the highest ratings for financial strength currently awarded to any life insurer given by all four leading independent rating agencies: A.M. Best (A++), Fitch (AAA), Standard & Poors (AA+), and Moodys Investors Service (Aaa). (Individual independent rating agency commentary as of 1/10/14).
New York Life Insurance Company is the largest mutual life insurance company in the U.S.1 Being mutual means our primary focus is on creating long-term financial safety and stability for our policy owners, rather than the short-term gains favored by Wall Street.
How can I benefit from an income annuity?
An income annuity can help protect against the risk of outliving your savings. No matter how long you live, you will always have the security of knowing that you have a regular monthly income. The amount you receive each month is guaranteed, and payments will continue for as long as you live.
What other advantages does an income annuity provide?
An income annuity is not subject to stock market performance. Regardless of the ups and downs of the financial markets, you can be confident that your annuity income is locked in and guaranteed. Additionally, with this product you set aside a part of your assets to help cover future living expenses. Monthly income checks, should you choose this payment option, make it easier for you to stay on budget, and helps to ensure your basic needs such as food, housing, and health care are covered.
What is the rate of return on an income annuity?
An income annuity is not an investment that provides you with a rate of return over a fixed period of time, like a CD.2 Rather, it's an income product that provides you with fixed monthly income that is guaranteed for life—no matter how long you live—and no matter how the markets perform. The total payout you receive from this income annuity will be largely determined by your own longevity. The longer you live, the more income you will receive.
How soon can payments begin?
Depending on the income annuity3 you decide to purchase, income payments can begin now or later. If you purchase a single premium immediate annuity, you’ll receive income within 12 months of purchase—beginning one month after purchase (for monthly payouts), one quarter after purchase (for quarterly payouts), and so on. If you purchase a deferred income annuity, your payments will begin at any date of your choosing two to 40 years in the future. Just like a single premium immediate annuity, you can choose to receive your income payments monthly, quarterly, semi-annually, or annually.
Are there age or health restrictions?
Issue ages vary depending on the type of annuity you purchase, and the tax qualification of the funds you use to purchase your annuity. Additional age restrictions may exist depending on specific benefits selected at time of purchase. No medical history is required.
What kind of funds can I use to purchase an income annuity?
To fund your annuity, you may want to use a portion of your checking or savings accounts, CDs, mutual funds, or inheritances. You may also be able to transfer certain retirement accounts, such as your IRA, 401(k), or lump-sum pension plan payout. In some cases, you can even combine multiple assets to fund an income annuity; however, tax-qualified and non tax-qualified funds may not be commingled.
How much of my money should I use for an income annuity?
You can purchase an income annuity with any amount of $5,000 or more, though premium payments of $3 million or more require prior New York Life Insurance and Annuity Corporation approval. (Includes aggregate premiums from multiple policies.) Together with your Agent, you can determine the most appropriate amount of money to use to purchase an income annuity, based on your specific needs and situation.
What happens to my money if I pass away prematurely?
Payment options vary. Most New York Life income annuities offer some form of death benefit. One of the payment options you can select is a “Cash Refund.” If you die before your income payments equal the full amount of your annuity purchase price, your beneficiary will be paid the difference. Additional payout features are also available.
Can I ever withdraw more than my monthly income?
Money used to purchase an income annuity will be permanently locked into the contract and can only be returned in the form of income payments. However, if you are at least age 59, you may be able to access future payments, which can be helpful in the event of an emergency, through optional features.4
For most jurisdictions, the policy form number for the New York Life Guaranteed Lifetime Income Annuity is ICC11-P102; it may be 211-P102 and state variations may apply.
For most jurisdictions, the policy form number for the New York Life Guaranteed Future Income Annuity is ICC11-P100; it may be 211-P100 and state variations may apply.