An annuity is a contract between you and an insurance company used to provide long-term growth and a lifetime of income. Depending on the type of annuity you choose, you get professional money management, the potential for tax-deferred growth, flexible investment options, protection of principal and protection for your beneficiaries.

The three main types of annuities are fixed, indexed, and variable:

Fixed Annuities
Indexed Annuities
Variable Annuities

Fixed Annuities

Fixed annuities offer safety of principal and earn a guaranteed rate of interest for a specified time period*. Because of their fixed rate, this type of annuity offers less protection from the effects of inflation than a variable annuity, but you will know how much future income you can count on.

Indexed Annuities

An equity-indexed annuity is different from other fixed annuities because of the way it credits interest to your annuity's value. Most fixed annuities only credit interest calculated at a rate set in the contract. Equity-indexed annuities credit interest using a formula based on changes in the index to which the annuity is linked. The formula decides how the additional interest, if any, is calculated and credited. How much additional interest you get and when you get it depends on the features of your particular annuity.

Your equity-indexed annuity, like other fixed annuities, also promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the index-linked interest rate is lower. The value of your annuity also will not drop below a guaranteed minimum. For example, many single premium annuity contracts guarantee the minimum value will never be less than 90 percent (100 percent in some contracts) of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The insurance company will adjust the value of the annuity at the end of each term to reflect any index increases.

Variable Annuities

Variable annuities offer more control over your investment choices, which may range from conservative to more aggressive portfolios. With variable annuities, you assume the investment risk as the income you receive will vary monthly or annually, depending on the performance of the underlying investment portfolios you choose. In many cases, you can choose from a variety of your favorite money managers. Most variable annuities allow you to make tax-free transfers among investment options, and the tax deferred growth potential of your investments could help preserve the purchasing power of your money.
*Guarantees associated with annuities depend on the claims-paying ability of the insurance company that issues the annuity contract.

Features

Allegiant Financial offers a wide variety of annuities and other investment vehicles designed to help you sustain a desired level of income in retirement. The following items lead to a discussion of important issues you may want to consider as you plan for the future:

• Are you saving enough for retirement?
• Why consider an annuity?
• Diversifying investments in a variable annuity
• Why tax deferral?
• Managing your income
• Fees and costs involved
• Frequently asked questions

For more information and a free prospectus containing more complete information, including charges and expenses, on the fixed and variable annuities available through Allegiant Financial, please contact an Allegiant Financial Advisor, toll free at 1-866-672-1222.
*Variable annuities are offered only by prospectus.

Are You Saving Enough For Retirement?

As life expectancies increase, it's important to remember that you may spend as much time in retirement as you do in your working career. Conventional retirement plans and Social Security can provide an important foundation, but you may need more income than these sources will provide:

Retirement Income Sources

Factors to Consider As You Plan for the Future

As baby boomers begin taking their Social Security benefits, many experts believe the structure and schedule of these benefits will have to change.
If you are still working, take maximum advantage of your employer-sponsored retirement plan. However, you should consider making provisions in order to increase your future income through additional tax-deferred saving and investing.

Even if inflation averages only 3-4% a year, the purchasing power of your investment dollar can be cut in half in just 20 years. With proper planning, you can invest to outpace inflation and help secure adequate future income.

Your personal savings and investments will play an increasingly important role. Consider strategies that take a longer retirement period into account-by deferring and reducing current taxes, investing to combat inflation, and managing the future flow of income.

Why Consider An Annuity?

Whatever your personal circumstances or stage in life, annuities can help you make the most of your retirement savings:

I'm too far behind

School loans or the cost of a new home may have limited your investment resources. Because they offer tax-deferred compounding, annuities can accelerate the growth potential of your investments to help you make up for lost time.

I'm almost ready to retire

If you're paying too much in taxes on dividends or interest from securities or mutual funds-even if you're not taking these as income-consider that with an annuity you're taxed only when you decide to make a withdrawal. And unlike withdrawals from an IRA or qualified retirement plan where you work, withdrawals from an annuity don't have to start when you reach age 701/2.

I'm concerned about outliving my savings

Some annuities can make the most of limited retirement savings by offering payout options that can provide guaranteed lifetime income*.
*Income guarantees are subject to the claims-paying ability of the insurance company that issues the annuity contract.

Diversifying Investments in a Variable Annuity

The following examples show hypothetical investment mixes suitable for investors considering a variable annuity. Each can be tailored according to your changing needs:

Investing for Aggressive Growth

At age 32, Larry has a long-term investment goal of establishing a retirement fund. He is already contributing the maximum to his company retirement plan, but he plans to retire at age 55. His primary objective is capital appreciation. Because he has many years until he will need his money, Larry can accept greater investment volatility in the short term in exchange for potentially higher returns over the long term.

At age 32, Larry has a long-term investment goal of establishing a retirement fund. He is already contributing the maximum to his company retirement plan, but he plans to retire at age 55. His primary objective is capital appreciation. Because he has many years until he will need his money, Larry can accept greater investment volatility in the short term in exchange for potentially higher returns over the long term.

Investing for Moderate Growth

Like Larry, Janet and Bob also want to build a retirement fund. The couple expects their money to grow, but, because they are both 50, stability of principal is also an important consideration.

Investing for Principal Preservation

John and Jessica, both age 66, have just retired. They understand the need to keep their money growing to avoid a loss of purchasing power, but they are even more concerned about the stability of their retirement assets.

Why Tax Deferral?

Income Taxes Deplete Earning Potential

Taxes can rob up to 30% or more of your annual investment return. As a result, you could lose critical compounding interest in the early stages-interest that could maximize the growth of your investment.

Inflation Erodes the Value of Your Dollar

Do you remember when you bought your first car, house, a bag of groceries? The same money borrowed to buy a house 30 years ago is required to buy the average car today.

SOURCE: Automobile: 1975 American Automobile Manufacturers Assn., Dept of Commerce Bureau of Economic Analysis, 1996. 1995-2025 information was calculated on an avg. growth rate of 2.5%.* Home: 1975-1995 National Association of Realtors. 2005-2025 information was calculated at an average growth rate of 3%.* Education: 1975-1985 National Center for Education Statistics, Digest of Educational Statistics 1995. 1995 - 2025 information was calculated at an average growth rate of 4.5%.*

Tax-deferral: The #1 Benefit of an Annuity

A tax-deferred investment can grow faster than the same amount invested in a taxable investment earning the same return. Because you pay no tax on annuity earnings until you withdraw them, your money keeps working for you. And with a variable annuity you can choose investments that have the potential to outpace inflation.

Annuities offer a combination of unlimited contributions and tax-deferred growth that can help you manage the two greatest threats to your future financial security: taxes and inflation. For more information and a free prospectus containing more complete information, including charges and expenses, on the fixed and variable annuities available through Allegiant Financial, please contact an Allegiant Financial Advisor or complete our online form.
*Derived from historical growth rates based on data provided by the AAMA, NAR and the Nationa; Center for Education Statistics.

Managing Your Income

Annuities have two phases: the accumulation phase and the income or "payout" phase.

In the accumulation phase:

your money compounds tax-deferred. Even after you retire, your money can continue to accumulate tax-deferred until you need it. Unlike most qualified plans, you are not required to begin taking distributions at age 701/2.

In the payout phase:

you can withdraw your money in a lump sum, through systematic withdrawals, random withdrawals-or you can "annuitize." Annuitizing means you receive regular payments over a certain period or over one or more lifetimes.

Weighing Your Withdrawal Options

Annuities are similar to qualified plans in that, if you withdraw your money before age 591/2, you may be subject to a 10% IRS penalty on the interest portion withdrawn.

Lump-sum withdrawal

Taking all of your money at once may be the most costly option. Even though only earnings are taxed, your tax liability can be substantial.

Periodic withdrawal

By leaving the bulk of your annuity assets in your account, your money can continue to accumulate tax-deferred. You receive regular income, and the earnings portion is taxed as ordinary income, not capital gains.

Guaranteed income option

If you annuitize, you may choose to receive: a specified amount of regular income to be paid until funds are depleted, or income over a specified period of time, or guaranteed income for life. You may also choose between two types of payments:
fixed annuitization-where you receive a constant payment based on your life expectancy and other calculations made by the insurance company;
or
variable annuitization-where your monthly income payment will increase or decrease based on the performance of the annuity contract's underlying investments.

Emergencies

Annuities are used primarily for long-term savings, but many allow you to withdraw up to 10% of your account value each year without surrender charge or penalty. Certain annuities also allow exceptions to surrender charges in cases of hospitalization or terminal illness.
For more information and a free prospectus containing more complete information, including charges and expenses, on the fixed and variable annuities available through Allegiant Financial, please contact an Allegiant Financial Advisor or complete our online form.

Annuities Fees and Costs

Administrative fees cover the cost of record keeping and providing statements and other communications. Depending on the amount you invest (your premium), these fees may be waived.

Management fees cover the cost of professional managers responsible for the investment portfolios of variable annuities.
The Mortality and Expense charge pays for the guarantee of death benefits, lifetime income, and the guarantee that contract expenses will not increase.

Sales charge

Because there are no front-end sales charges for most annuities, 100% of your money goes to work for you immediately. However, a declining "contingent deferred sales charge" is imposed on withdrawals exceeding contract provisions. For example, many contracts permit you to withdraw up to 10% of your account value each year without charge. Withdrawals in excess of that amount are typically subject to a declining withdrawal charge.

Frequently Asked Questions

What is a Variable Annuity?
A variable annuity is a long-term investment vehicle where your money can be invested with one or multiple money managers on a tax-deferred basis.

What is the difference in taxation for taxable and tax-deferred investments?
When you invest in a taxable investment (stocks, bonds, or mutual funds), any dividends or interest you earn is considered taxable income. And when you sell the investment (or your mutual fund does and gives you a distribution), you owe capital gains tax on any appreciation.
When you invest in the underlying securities of a variable annuity, any growth is credited to your account but is not taxed in that year. You pay taxes only when you withdraw the money. Also, unlike most qualified plans, there is relatively no limitation on the dollar amount you can contribute per year or mandatory distribution requirement at age 701/2.

How do I decide which Annuity is right for me?
An Allegiant Financial Advisor can help you review your individual circumstances, advise you about which type of annuity suits your needs, and suggest an allocation tied to your goals and tolerance for risk.

How secure is my money?
In most instances, the insurance company underwriting the annuity contract guarantees that if you die before you begin receiving payments, your beneficiary will receive the greater of:

1. The total amount of the premiums you have paid (less any withdrawals, charges and fees)
2. The current value of your annuity contract (less any withdrawals).

Can I access my money before age 59 1/2?
Yes. Most variable annuities provide for a withdrawal of a specified amount free of charge. However, if you are younger than age 5991/2, the IRS may impose a 10% penalty tax. Plus, the amount withdrawn may be worth more or less than its original cost depending upon the performance of the underlying sub accounts.

What does Annuitize mean?
When you annuitize, you begin to receive regular payments. Most companies offer a variety of annuitization or payment options, based on your life expectancy or how long you expect your income to last.