Annuities 

annuities 
The goal of retirees — past, present, and future — is to always have a source of income. In the past, retirees could rely on Social Security and employer-sponsored pensions as that source of income. Over the years, much has changed. Today, life expectancies have increased, while the certainty of Social Security and employer-sponsored pension plans has diminished. By all estimates, the next generation of retirees, the baby boomers, will live longer and spend more time being retired than any previous generation.

Your Retirement 

Annuity Basics 

Buyer Tips 

Income Plan Options 

Our Annuities 

Contact Us 

Is Your Retirement on Track?

When it comes to your own retirement strategy, you may be wondering if you're on track to have enough assets and provide enough income at the retirement stage of your life.

  • Are you prepared for a retirement that may last 10, 20, 30 years or longer?
  • Will your retirement income last as long as you?
  • Will you have enough money when you are ready to retire?

Are Annuities an Option?

Annuities are established for the purpose of providing a regular stream of income, typically upon retirement. They can be shaped and sized according to your needs and give you the option to begin receiving the income at a future date or immediately. You can fund your annuity gradually or all at once. Depending on the type of annuity, its value can be tied to a fixed interest rate or the performance of underlying investment funds.

You can arrange:

  • for annuities to provide an income for a specific period of time or an entire lifetime.
  • to receive income that is guaranteed from a fixed income plan or  income that is tied to the performance of underlying investment funds from a variable income plan.*
  • to have annuities provide income to you alone, to you and a significant other, to continue to whichever of you lives the longest, and even to another beneficiary beyond the lifetime of you and any significant other.

*All guarantees are backed solely by the claims-paying ability of the issuer.

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Annuities... What Are They?

An annuity, generally, is a payment received at regular intervals.

Annuities typically are sold and backed by life insurance companies. You can establish an annuity contract to put aside money for retirement or provide yourself with a regular stream of income in retirement.

When it comes to making sure you are financially prepared for retirement, annuities can be very powerful vehicles. They provide the means to accumulate funds on a tax-deferred basis, which can make a significant difference in your ability to achieve the lifestyle you envision for yourself throughout this potentially very active stage of life.

Annuities are sometimes thought of as being the opposite of life insurance, in that you buy life insurance to pay a benefit in the form of policy proceeds to your beneficiary when you die, and you buy an annuity to pay a benefit in the form of a stream of income to yourself while you are alive.

How Annuities Work

In exchange for either a single deposit or a series of deposits you make into your annuity, the insurance company promises to make a series of payments to you out of the annuity — payments you can use to supplement your income after you retire.

The guarantees in an annuity are backed solely by the claims-paying ability of the insurance company, and should be a key consideration in making your purchase decision.

Phases of Annuities

  • Deferral phase: Annuities have a deferral phase and an income phase. The deferral phase refers to the time period between the date the contract is established and the date of the first distribution. During this time, values accumulate on a tax-deferred basis, at either a fixed or a variable rate of return. If you have an immediate annuity, the deferral phase is either non-existent or very minimal, in that the first distribution from the plan typically takes place within one year. If you have a deferred annuity, the deferral phase will continue until the income begins at some future date.

  • Income phase: Whether immediate or deferred, the income phase refers to the time period that income is withdrawn from the annuity, which may be for a specified number of years or for a lifetime.

Are Annuities Right for You?

Annuities are not "one size fits all" products. However, whether you are just starting to plan for retirement, are fast approaching retirement, or have already retired, an annuity may be right for you. Take the following points into consideration in determining if an annuity is right for you:

  • Annuities can work to your advantage if you will not need to take distributions from the plan until after you reach the age of 59½. The IRS imposes a 10% early withdrawal penalty for distributions prior to 59½.

  • Annuity contracts may impose a withdrawal (surrender) charge for early withdrawals made during the early years of the investment.

  • The earnings from annuities are not subject to income tax until they are withdrawn. Your principal earns interest, and your earnings compound on a tax-deferred basis. This can be especially appealing if you are currently in a higher tax bracket than you expect to be in after you retire.

  • For non-tax-qualified contributions, there is no ceiling; you can contribute as much as you like.

  • For non-tax-qualified annuities the IRS does not impose mandatory distributions; you may delay taking distributions from an annuity well into your retirement years.

  • Avoids probate – Annuities do not need to go through the probate process for your beneficiaries to receive the death benefit.

Questions to Consider:

Are you concerned about maintaining your lifestyle during retirement or the possibility of outliving your income?
Accumulating funds in an annuity during your working years can minimize gaps in income throughout your retirement years. Both income and deferred annuities offer a variety of income options, including those that can supplement your income during your early active years of retirement, help you sustain the lifestyle to which you have become accustomed, or guarantee a continuing income as long as you are alive, no matter how long that may be.*

If you have an employer-sponsored (tax-qualified) retirement plan, such as a 401(k), have you contributed the maximum amount?
If you have maxed out contributions to your employer plan and personal IRA, and want to save more for retirement on a tax-deferred basis, annuities allow continued contributions and tax-deferred growth. There is no IRS limit on the amount you can put into a non tax-qualified annuity.

Will you need the money before you reach age 59½?
Annuities are designed to be retirement vehicles. Therefore, if you take out your funds before age 59½ the IRS may subject you to a 10% early withdrawal penalty in addition to any applicable ordinary income tax. Contractual withdrawal charges may also apply.

Do you expect to be in a lower tax bracket after you retire?
When you are older you are likely to be in a lower tax bracket, which makes deferring taxes until you actually withdraw the funds all the more advantageous.

*The guarantees in an annuity are backed solely by the claims-paying ability of the issuing company.

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Understand How Annuities Work

The easiest way to understand annuities is to think of them as the opposite of life insurance. Annuities pay when you are alive; life insurance pays when you die. More formally, an annuity is a contract between an individual and the insurance company. In exchange for either a single deposit or a series of deposits you make into your annuity, the insurance company promises to make a series of payments to you out of the annuity — payments you can use to supplement your income during retirement.

The earnings in deferred annuities accumulate on a tax-deferred basis, and at some date in the future, you begin to receive lifetime income payments.

Determine Your Priorities

Annuities provide the means to accumulate funds on a tax-deferred basis, which can make a significant difference in your ability to achieve the retirement lifestyle you envision. A unique benefit of annuities is that they can provide income payments that are guaranteed* to continue for life.

Things to consider:

  • Annuities are typically suitable for retirement and are meant to be a long-term investment. They are not suitable for short-term investing or to be used as an emergency fund.

  • Neither the interest on fixed deferred annuities nor the increase in value on variable deferred annuities is subject to taxation until withdrawn. This is especially appealing if you expect to be in a lower income tax bracket during retirement.

  • Annuities can provide insurance against outliving your income.

  • Annuities can offer a guaranteed death benefit following the death of the Annuitant.

  • Annuities offer income options for you alone or you and another person, such as your spouse or partner, to address the issue of outliving your assets or leaving your survivor without sufficient income.

  • Income from annuities can complement your other sources of income.

When Selecting Annuities

Check Out the Annuity Charges and Fees Before Buying

Because annuities are intended to be savings for retirement, if you make a withdrawal before age 59½, the IRS can impose a penalty of 10 percent. Withdrawal charges may apply for deferred annuities and can start at 7 percent for the first year and decline by 1 percent each year until they disappear, usually after year eight. These charges serve to underscore the long-term nature of deferred annuities, whether variable or fixed. There are annuity contracts that do allow you to withdraw 10 percent annually without incurring any withdrawal charges, so be sure to check the contract or prospectus before making any withdrawals from an annuity.

Consider the Reputation and the Quality of the Company

Annuities are only as good as the company that backs them. You want to know for certain that the company that issues your annuity will be around to make payments during your retirement. With an annuity from Northwestern Mutual, you'll gain the financial strength and stability of one of the most respected insurance companies in operation today. There are several ratings agencies that rate insurance companies on the quality of their fiscal fitness, quality of investments, and overall financial soundness. A credit rating represents an independent assessment of the insurer's ability to pay its claims on time and meet all its other financial obligations, the bottom line for any life insurance company. There are four leading agencies – A.M. Best Company, Fitch Ratings, Moody's Investors Service and Standard & Poor's – from which Northwestern Mutual has been awarded the highest financial strength ratings among any life insurer.

Third-party ratings are a measure of a company's relative financial strength and security but are no reflection on the performance of the variable funds. The performance of variable funds is not guaranteed and can fluctuate so that the value of your contract can be more or less than your original investment. Third-party ratings are subject to change.

*All guarantees are based solely on the claims-paying ability of the issuer.

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Annuity Income Plan Options

An income plan can be an important part of your income strategy for retirement because it provides a solid base of lifetime income to help address both the uncertainties and the opportunities that retirement brings.

Once you’ve decided when to start your income payments, you choose the income plan that’s right for you. Northwestern Mutual offers a variety of income plan options.

Note: Not all income plans are available in all types of annuities. Please review the annuity contract or prospectus or consult your financial representative for further details.

Lifetime or Period Certain

When the time comes to create (receive) income from your annuity, determine how long you will need the income to last.

  • Lifetime: If your objective is to always have a steady stream of income that you can't outlive, you'll want to choose a lifetime income option.

  • Period Certain: If your objective is to have income last for a certain number of years or a specific period of time, you’ll want to choose a period certain option, typically ranging anywhere from 5 to 20 years.

Single or Joint & Survivor (Lifetime Plans)

Choose from a variety of income plans that provide guaranteed income for your life or the lives of you and another person (a spouse or partner for example).

  • Single Life: Pays an income as long as you, the Annuitant, are alive; income stops when you die. This option gives you the largest amount of income because it is based on the life of only one person.

  • Single Life with Period Certain: Income is paid as long as you, the Annuitant, are alive, but if you die within the period certain, typically set between 5 and 20 years, the income will continue to a named beneficiary for the remainder of the period certain.

  • Joint Life or Joint Life with Survivor: Income is paid for your lifetime as the Annuitant, or the lifetime of the Joint Annuitant, whichever is later. You can further specify the amount of the income payment (all, 2/3 or half) that will continue to the Joint Annuitant if he or she is still living when you die. You can also decide whether or not the reduction will also apply for payment to the Annuitant if the Joint Annuitant is the first to die.

  • Joint Life or Joint Life with Survivor and a Period Certain: Income is paid for your lifetime as the Annuitant, the lifetime of the Joint Annuitant or for the period certain you choose, whichever is later. You can further specify the amount of the income payment (all, 2/3 or half) that will continue to the Joint Annuitant if he or she is still living when you die. You can also decide whether or not the reduction will also apply for payment to the Annuitant if the Joint Annuitant is the first to die.

Learn more about which Northwestern Mutual Income Plan is right for you:

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Our Annuities

Annuities can play an important part in your diversified retirement strategy. Annuities provide a way to accumulate money on a tax-deferred basis and then create a stream of income for your life or a specified period of time. That income can be used to fund your essential needs during retirement.

Northwestern Mutual offers deferred annuities (variable & fixed) and income annuities to include our exclusive portfolio suite of income annuities to help meet your needs. In addition, we also offer various income plans which are available on existing Northwestern Mutual annuity contracts. Learn more about our income plans in the Income Plans tab.

Deferred Annuity Product Suite

  • Select™ Variable Annuity
    A deferred variable annuity that offers tax-deferred growth and competitive expenses and investment choices and is managed by a team of professional money managers with extensive experience.

  • Select Fixed Annuities
    A deferred fixed annuity with a guaranteed fixed rate in which your earnings grow tax-deferred.

    Select Platinum - This annuity offers a one-year guarantee period and a relatively stable interest rate for the first eight years.

    Select Gold -This annuity has an interest rate that will follow interest rate trends upon renewal.  Currently, it has a one-year or three-year renewal.

    Select Silver - This annuity has an initial five-year guarantee period at issue with guarantee periods between one and five years thereafter, subject to availability.

Income Annuity Product Suite


Immediate Income Annuity Products

  • Select Portfolio Immediate Income Annuity
    This exclusive, patent-pending retirement solution from Northwestern Mutual offers immediate, guaranteed fixed income payments that can grow with potential dividends.1

  • Select Immediate Income Annuities
    A fixed immediate income annuity with income that can begin now or within 13 months. The amount of income you receive each month is fixed and guaranteed2 for the rest of your life or for a specified period of time.

Deferred Income Annuity Products

  • Select Portfolio Deferred Income Annuity
    This exclusive, patent-pending deferred income annuity from Northwestern Mutual offers guaranteed fixed income payments and also the opportunity to grow your income payments with potential dividends.1


  • Select Deferred Income Annuity
    A fixed deferred income annuity that begins within a 13-month to 10-year timeframe. The amount of the income payments you receive is fixed, guaranteed2 and not affected by what happens in the market.

Income Plan Product Suite

  • Select Variable Income Plan
    This is a settlement option available with a Northwestern Mutual Select Variable Annuity

  • Select Portfolio Income Plan
    This is a new settlement option available for Northwestern Mutual tax-qualified deferred annuity contracts. The Portfolio Income Plan provides the same innovative features as the Select Portfolio Income Annuities – guaranteed lifetime income2 that can grow through potential dividends.1

  • Select Fixed Income Plan
    This is a fixed settlement option available for Northwestern Mutual deferred annuity contracts. The amount of income you receive each month is fixed and guaranteed2 for the rest of your life or for a specified period of time.

Learn more about deferred annuities, income annuities or portfolio income annuities.

Contracts and features may not be available in all states.

1Dividends are not guaranteed.

2All annuity guarantees are backed solely by the claims-paying ability of Northwestern Mutual.

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