10 Things You Need to Know about Income Annuities

Target Market: Pre-Retirement, Retirement

1. 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. A single premium immediate annuity, such as New York Life's Lifetime Income Annuity¹ allows you to convert part of your retirement funds into a stream of guaranteed² lifetime income payments using a single lump sum of money called a "premium." 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.

2. Question: How can I benefit from an income annuity?

Answer: 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.

Your income is guaranteed by New York Life Insurance and Annuity Corporation, a wholly owned subsidiary of New York Life Insurance Company. An industry leader for more than 160 years, New York Life has earned the highest possible ratings for financial strength given by all four leading independent rating agencies: A.M. Best, Fitch, Standard & Poor's, and Moody's Investors Service. (Ratings as of 2/1/2009.)

New York Life is America's largest mutual life insurance company. Being mutual means our primary focus is on creating long-term financial safety and stability for our policyholders, rather than the short-term gains favored by Wall Street. When we say New York Life is "The Company You Keep^®," that's a promise for life. Fortune 500 Ranked within Industries, Insurance: Life and Health (Mutual), Fortune magazine, 2008.

3. Question: What other advantages does this annuity provide?

Answer: An income annuity can provide protection against losing retirement savings if stock market performance declines. 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 reasonable 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 to ensure your basic needs such as food, housing and health care are covered.

4. Question: What is the rate of return on an income annuity?

Answer: A Lifetime Income Annuity is not an investment that provides you with a rate of return over a fixed period of time, like a CD****. Rather, this annuity is 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.

5. Question: How soon can payments begin?

Answer: Income payments generally begin one payment period after the policy date. If you choose to receive a monthly income, your payments will begin one month after the policy date, whereas if you choose to receive a quarterly income, payments will begin three months after the policy date. You may select the start date for receiving payments, but payments must begin within one year of the policy issue date.

6. Question: Are there age or health restrictions?

Answer: For non-qualified funds, owners and annuitants must be younger than age 96. For tax-qualified funds, owners (primary annuitants) must be between the ages of 18-89, and joint annuitants must be younger than age 90. No medical history is required. Additional age restrictions may exist depending on specific benefits selected at time of purchase.

7. Question: What kind of funds can I use to purchase an income annuity?

Answer: To fund your annuity, you may want to use a portion of your checking or savings accounts, CDs and 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 a single lifetime income annuity, however, tax-qualified and non tax-qualified funds may not be commingled.

8. Question: How much of my money should I use for income annuity?

Answer: You can purchase an income annuity with any amount of $10,000 or more, though premium payments of $5 million or more requires prior New York Life Insurance and Annuity Corporation approval.

9. Question: What happens to my money if I pass away prematurely?

Answer: Unlike some income annuities, one of the payment options you can select with New York Life's Lifetime Income Annuity is a "Cash Refund" feature that guarantees that you will not lose any of your premium. If you die before your monthly income payments equal the full amount of your annuity purchase price, your beneficiary will be paid the difference. Additional payout features are also available.

10. Question: Can I ever withdraw more than my monthly income?

Answer: Money used to purchase this plan will be permanently locked into the contract and can only be returned in the form of monthly payments. However, if you are at least age 59 ½, you may be able to access future payments, which can be helpful in the event of an emergency.

A Payment Acceleration Feature* enables you to receive your next scheduled monthly payment, along with five subsequent payments — for a total of six months of income payments paid to you all at once. When you exercise this option, your income payments will not be paid for the next five months. This feature may only be exercised twice during the life of the policy and is only available on non-qualified polices with monthly payment schedules.

A one-time Cash Withdrawal Feature** allows you a one-time withdrawal of up to 100% of the discounted value of remaining guaranteed payments at any time within the guaranteed payment period. Once this option is exercised, future income payments through the end of the guaranteed payment period will be reduced by the withdrawal percentage you elected. If the annuitant is alive at the end of the guaranteed payment period, full annuity payments will resume for the life of the policy. This feature is only available on non-qualified policies with a Life with Cash Refund or Life with Period Certain payment option.

30% Cash Withdrawal** allows you a one-time withdrawal of 30% of the discounted value of remaining payments expected to be paid to you based on your life expectancy when you purchased your policy. You may exercise this option on the 5th, 10th, or 15th anniversary of your first income payment, or upon proof of a significant, non-medical financial loss as specified in your policy***. Once this option is exercised, future income payments will be reduced by 30% for the life of the policy. This feature is only available on non-qualified policies with a Life Only or Life with Percent of Premium Death Benefit payment option, and on all qualified policies.

1. Lifetime Income Annuity is issued by NewYork Life Insurance and Annuity Corporation, a wholly owned subsidiary of New York Life Insurance Company, 51 Madison Avenue, NY, NY 10010

* Proceeds will be fully taxable at the time of receipt. You may wish to consult with your tax adviser.
** Proceeds will be fully taxable at the time of receipt. You may wish to consult with your tax adviser. The 30% cash withdrawal and the 100% cash withdrawal features are not available in OR or WA.
*** Non-medical financial loss provision not available in CA, CT, FT, NJ, and NY
**** CDs are FDIC insured up to $250,000 per deposit.

This material is for informational purposes only. Neither New York Life nor its agents provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.

This educational third-party article is being provided as a courtesy by New York Life Insurance Company. For more information on this topic, contact me.

EOE M/F/D/V