What is an annuity?
You may think annuities are complicated, but they are actually quite simple. An annuity is a contract between you and SBLI that helps you accumulate money and ultimately yield a steady income stream in retirement. With this contract, you make either a lump sum payment or a series of payments over time, and SBLI promises to make payments to you at a guaranteed rate, either immediately or at a later date.
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Why should I purchase an SBLI annuity?
It’s perfect for generating income in retirement because it will provide you with regular payments over the course of your entire life (or for as long as you choose). In addition, one of the best features of SBLI’s deferred annuity is tax-deferred interest growth. Simply put, the earnings on your annuity will grow and you won’t pay Federal or state taxes on them until you begin to make withdrawals.
Click here for thumbnail charts that highlight our annuities’ benefits.
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What is an immediate annuity?
An immediate annuity is an annuity that you purchase with a lump sum payment. SBLI’s Single Premium Immediate Annuity begins to provide an income stream immediately after you purchase it (usually after the first month).
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What is a deferred annuity?
A deferred annuity is an annuity that you purchase with either a lump sum payment or a stream of payments, spread out over time. You may begin to receive payments from the annuity at a later date. SBLI’s IRA Deferred Annuity and SBLI’s Life Saver III Annuity are both deferred annuities.
Here is an overview of each:
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What is the Accumulation Period of an annuity?
This is the phase when your earnings grow.
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What is the Income Phase of an annuity?
This is the phase when you begin to receive pay-outs or income payments.
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What do you mean by "tax-deferred"?
Tax-deferred means that you do not pay taxes on the earnings of your annuity today. You will pay taxes on the earnings at a later date, when you withdraw your earnings.
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How are payments/withdrawals from my deferred annuity taxed?
Your annuity’s earnings, when withdrawn, are taxed as ordinary income. Your contributions, when withdrawn, are not taxed. (Note: Traditional IRA contributions may be taxed upon withdrawal depending upon their tax deductibility when contributed.)
From the IRS’s point of view, withdrawals are treated as coming from earnings first, then contributions. Withdrawals of earnings prior to age 59½ are generally subject to an additional 10% tax penalty. There are additional rules and exceptions. SBLI recommends that you speak with your tax advisor for more details.
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How are payments from an immediate annuity taxed?
Your immediate annuity’s earnings, when withdrawn, are taxed as ordinary income. Your contributions, when withdrawn, are not taxed.
Since your SBLI immediate annuity is funded by a lump-sum payment, a percentage of your original lump-sum payment is allocated towards your contribution amount and that part of the payment is not taxed. The rest of the payment is taxable as ordinary income. There are additional rules and exceptions; SBLI recommends that you speak with your tax advisor for more details.
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Is an annuity appropriate for funding my retirement?
An annuity may be entirely appropriate as a part of your overall retirement planning, particularly because:
- It is tax-deferred;
- You will enjoy a guaranteed interest rate;
- You may have "maxed-out" your 401(K) contributions; and
- You want to have a steady income stream for the rest of your life.
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What is a beneficiary?
The beneficiary is the person, people, and/or organization that would receive the annuity’s proceeds in the event of a death claim.
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How do I designate a beneficiary?
You designate a beneficiary at the time you purchase an annuity from SBLI.
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