Investing Your Money

Anatomy of an Annuity

As people take greater control over planning for retirement, the number of products designed to help them with that task has grown dramatically. Many mutual fund firms, insurance companies, banks, and employers offer a wide range of retirement planning tools- Individual Accounts (IRAs), 401(k) plans, 403(b) plans, and Roth IRAs, to name a few.

Fixed Annuities – offers safety of principal and rate of return for a set period of time guaranteed by the insurance company. When the guarantee period is over (typically after one to 10 years), the issuer offers a new rate for the next period.

Withdrawals made prior to age 59 ½ may result in an IRS penalty. Product and product features vary by state and insurance company. Guarantees are based on the claims-paying ability of the issuer.

Equity Index Annuities – is a special type of fixed annuity in which earnings credited to the contract are based on a formula linked to an independent stock market index like the Standard & Poor’s 500 Stock Index (S&P 500).

You should consider an equity indexed annuity’s risks, charges and expenses carefully before investing. Equity indexed annuities often have features such as limits on the rate of return available and minimum guaranteed rates of return. Further, these vehicles do not allow for participation in dividends accumulated on the securities represented by the index. Withdrawals made prior to age 59 ½ may result in an IRS penalty. Pre-mature surrender charges, premium bonuses and multiple premium payment arrangements may apply. Equity indexed annuities are not suitable for all investors.

Variable Annuities – offers a selection of investment portfolios within the annuity that will fluctuate in value over time and may be worth more or less upon redemption. A variable annuity’s return is based on the investment results of the underlying portfolios. Note: Most variable annuities include a fixed account in addition to the investment portfolios.

You should consider a variable annuity’s risks, charges and expenses carefully before investing. Contact your Financial Advisor to request a prospectus, which contains this and other information about a specific variable annuity. Read it carefully before you invest.

Past performance is no guarantee of future results. Investment return and principal value of a variable annuity will fluctuate, causing shares, when redeemed, to be worth more or less than their original cost. Withdrawals made prior to age 59 ½ may result in an IRS penalty.

Unlike IRAs, which have an annual limit on how much you can contribute, annuities have no such restriction. In general, you can open an annuity with a contribution as high as $2 million or as low as $1,000. After that, you can contribute as much and as often as you want. What's more, you can invest knowing that no taxes will be due on any potential earnings until they are withdrawn from the account. Tax-deferral is just one of many features that may make annuities attractive to suitable retirement investors.

Choose carefully

Before choosing an annuity, it’s important to take several things into consideration: the investment selections, the historical performance of the underlying portfolios, the income options, the insurance features, fees and charges, and, perhaps most importantly of all, the soundness of the insurance company offering the annuity. In addition, you should examine your own personal circumstances by asking yourself the following questions:

After you’ve answered these questions, read all you can about retirement planning and then consult with an investment professional about specific choices you are considering. Only by doing your homework can you determine whether (and which) annuities should be part of your overall retirement plan.


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Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC.

Infinex and First Commonwealth Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

Disclosure - NOT Guaranteed by the Bank. NOT FDIC Insured. NOT a Deposit. Not Insured by any Federal Government Agency. May Lose Value including Loss of Principal.
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