W E A LT H M A N A G E M E N T
Thinking
about
retirement?
Learn the
ins and outs
of fixed and
variable annuities.
Understanding Annuities
AN ANNUITY IS an insurance contract
in which you make a lump sum invest-
ment or series of payments and, in
return, receive a stream of income for
a specific period or for life. Annuities
come in a number of variations, and,
as with any investment, the more you
understand how the tool you are using
fits your needs, the better. The two
main types are fixed and variable.
Fixed Annuities
With a fixed annuity, an insurance com-
pany guarantees a rate of return on your
investment, but the rate is relatively low,
and payments do not adjust with inflation.
Interest is tax-deferred, so you only pay tax
when you receive annuity payments. The
interest rate is usually guaranteed for a
specific period of time, such as 3 or 5 years.
Fixed annuities may be a good choice
for people with low tolerance for risk or
who prefer to protect their investment
from loss, even if it means they give up
the possibility for larger investment
gains. The stable monthly income of an
annuity may be desirable for people who
need to supplement Social Security or
who want to be sure they don’t outlive
their funds.
Variable Annuities
A variable annuity allows you to choose
how your funds are invested, and the
returns will vary depending on the perfor-
mance of the investments you choose.
Because they are based on riskier invest-
ments, variable annuities guarantee a
minimum payment amount, but the actual
payout may increase or decrease based on
the performance of the investments.
Higher potential returns are a major
advantage of variable annuities, but
your investment may lose value if the
securities in your annuity portfolio
decline in value. The structure and tax
implications of variable annuities can
also be quite complex, so it’s important to
understand whether and how well they
fit your needs as an investor.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.
Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees
are based on the claims paying ability of the issuing company. Withdrawals made prior to age
59 1 / 2 are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities
are subject to market risk and may lose value.
ANNUITY BASICS
VS. DEFERRED—
I MMEDIATE
Immediate annuities begin
making payouts as soon as the
initial investment is made, while
deferred annuities begin at a
future time, such as age 75, 80,
or older.
you start
A NNUITIZING—When
receiving regular payouts,
the legal status of your account
changes—it has “annuitized”—and
you can no longer change the
terms of the annuity or cancel it.
BENEFITS—What
D EATH
happens to invested funds if
you die is a big variable among
different annuity contracts.
There could be payments to a
beneficiary or tax liabilities for
your estate.
Build an action plan for your future. Sterling Wealth Services offers access to annuities
through LPL Financial and can be discussed with your Relationship Manager.
*Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered
through LPL Financial or its licensed affiliates. Sterling National Bank and Sterling Wealth Services
are not registered brokers/dealers and are not affiliated with LPL Financial.
Not FDIC Insured
Not Bank Guaranteed
Not Insured by Any Federal Government Agency
6
May Lose Value
Not a Bank Deposit
SNB.COM // CONNECT STRATEGY SPRING 2019 // RANKED ONE OF FORBES' BEST BANKS OF 2019
Learn to navigate
the complexity of
annuities. To read an online
exclusive about annuities and
taxes, visit connect.snb.com/
annuities.