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HELP! I’M RUNNING OUT OF MONEY

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owner puts in a total of $75,000, once he or she begins receiving pay- outs from the annuity, the owner will receive a total of $75,000 back tax-free. (Alternative minimum tax, state and local taxes may apply.) If the annuity is worth $87,000 at the time it is annuitized, the owner may only be taxed on the growth, $12,000.

Because the annuity grows tax-deferred, any movement of money within a variable annuity will not be considered for capital gains taxes. For example, you have $20,000 in the Growth subac- count, which is doing very well. You want to protect some of the money you have earned from this subaccount and wish to move $5000 to the Fixed subaccount. The transfer of the $5000 from the Growth subaccount to the Fixed subaccount is done completely tax- free. You won’t be taxed on the gain from the Growth subaccount.

IMMEDIATE ANNUITIES

Immediate annuities require the annuitant to pay a lump sum of money, rather than paying a number of premiums over time. The pay- outs to the annuitant begin as soon as the lump-sum payment is received, or the annuity start date. This date is the first day of the first period (i.e., month) for which an amount is received as an annuity, under the current tax law. A likely use of an immediate annuity is by someone who is about to retire and would like to receive monthly income right away. An immediate annuity can be paid out in either fixed or variable amounts.

DEFERRED ANNUITIES

In contrast to immediate annuities, deferred annuities can have one lump-sum payment by the annuitant, or the annuitant can pay a set of premiums over time. The payouts for deferred annuities typically don’t start for at least one year after the purchase payments have ended. Usu- ally, payouts don’t occur until many years later. However, just with immediate annuities, the payouts may be either fixed or variable.

Deferred annuities make up the larger segment of annuity con- tracts that are purchased due to the IRS rules governing annuity

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