FREQUENTLY ASKED QUESTIONS
Get answers about annuities
Frequently Asked Questions
Why an Annuity
What is an annuity?
An annuity is a contract between you and an insurance company. An annuity provides valuable benefits, including a guaranteed, steady income in retirement and, in some cases, throughout the rest of your life.
With the Retirement Foundation ADVSM Annuity, you are guaranteed the option for lifetime income. Plus your annuity has the opportunity to grow tax-deferred through credited interest.
How could an annuity fit into my retirement plan?
Think of your retirement plan as a pie with many slices. One slice may be investments, another may be Social Security, and yet another may be an annuity. With the Retirement Foundation annuity you are guaranteed lifetime income, even if the contract value falls to zero. The future of Social Security is uncertain and if your investments fall to zero, you will be able to count on income from your annuity.
Why do only life insurance companies sell annuities?
Annuities are insurance products that are designed to provide you with a source of retirement income. Annuities are intended to be long-term financial products, and they’re subject to strict oversight and regulations – including requirements about how annuity assets are held and managed. Insurance companies are structured to comply with insurance regulations, and other state laws.
What are the fees I'll have to pay?
Many financial products charge a fee. With the Retirement Foundation Annuity, there is a 1.05% fee which pays for the built-in benefit rider that guarantees lifetime income. For many people this fee is a fair trade-off for their annuity’s benefits and guarantee. If you choose the optional Flexible Withdrawal Rider, you also pay a monthly fee of 0.00833% of the accumulation value.
Is the interest guaranteed when you invest my money?
We guarantee protection from market losses. Indexed interest is not guaranteed; it can happen if the market grows. If you’ve chosen to receive fixed interest, it will be credited daily at the guaranteed rate for that contract year.
How can you afford to protect against losses when the markets go down?
We can offer the guarantee because we invest your money – along with millions of other contract owner's – in high-grade fixed income assets.
This is similar to how companies would invest if they were offering to credit you a fixed rate of interest – like a CD. However, we go one step further and can offer you more interest potential while maintaining the guarantee that you can’t lose money due to market performance because of our in-house risk management capabilities.
What is hedging?
Making strategic investments to manage overall risk is called hedging, and we’re experts at it. We’ve successfully done this for our products for over 15 years – through good years and bad – and our hedging capabilities have been chosen to manage market risks for companies across the globe.
This approach is different from the “hedge funds” you heard so much about during the 2008 financial crisis. Our focus is to provide the highest possible interest potential while maintaining the guarantee that you can never lose money due to market performance.
How often can I change my choice of allocations?
You can change once per year on your contract anniversary and the next 21 days after.
How many combinations of fixed interest rate and securities indexes can I choose?
There is one fixed interest rate and four indexes. You can select any combination you want or choose just one; the only restriction is that the percentage of each is a whole number and the total of all percentages add up to 100%.
What stocks or bonds or index shares will I own?
None. You will be buying an insurance contract. You will not own any securities or indexes.
Why do you track indexes?
It’s how we can help you benefit from market growth without risking your money in the market.
When do I get credit for interest I might earn?
We credit your account once per year on the last day of your contract year for index options. Fixed interest is credited daily.
What about all the gains and losses in between the first day of my contract year and the last?
We don’t count them individually; our goal is to have you benefit from the long-term trend.
Could it happen that the long-term trend is up for 364 days, and on day 365 of my contract year there’s a market crash and I don’t gain anything?
Yes, it could happen. And you are still protected from a loss.
If I choose an index, is there a maximum rate of interest I can earn?
Depending on the performance of the index allocations you've selected, you will earn interest up to a percentage, called the cap, that's determined at the beginning of each contract year. Your annual interest credit will always be between 0% and the cap.
- If the index goes down, your interest credit will be 0%.
- If the index change is between 0% and the cap, your interest rate is the change in the index.
- If the interest change is higher than the cap, your interest rate is the cap.
Won’t I be missing out on a lot of the benefits of the markets?
You’ll be missing some of the market highs, but also all of the lows. The Retirement FoundationSM Annuity uses index tracking to help you benefit from the markets without any of the market risk.
Wouldn’t I do just as well with a certificate of deposit (CD) from a bank or credit union?
Possibly, but CDs don’t guarantee lifetime income.
Wouldn’t I do better by staying invested for the long run in some good mutual funds?
You might. But you might not. There could be a severe drop in the markets just as you were retiring. If that happened, your retirement savings wouldn’t have time to recover before you had to withdraw your money and lock in your losses. Retirement Foundation annuity offers returns based on positive index changes without the risk of losing value due to index downturns.
Why should I buy the Retirement Foundation Annuity instead of one from any number of other insurance companies?
The Retirement Foundation Annuity offers the choice of a guaranteed lifetime income that has the potential to earn interest based on positive market changes. Allianz Life has been the #1 provider of fixed index annuities for 16 of the last 17 years. Allianz Life is one of the few annuity providers to provide the option for increasing income on our contracts; this is a benefit that can help you manage the impact of inflation on your retirement.BACK TO TOP
How old do I have to be before I can begin lifetime income withdrawals?
Both you (and your spouse if s/he is eligible) have to be age 50.
What happens if I put off the start of lifetime income withdrawals?
The amount of your income payment increases because the withdrawal percentage was able to increase each year you delayed.
If I put off the start date of lifetime income withdrawals can I begin whenever I want?
If it’s a tax-qualified contract, there may be required minimum distributions (like in a 401k or IRA) that must start by the age of 70½.
Can I start income at any point in the year?
You have to begin on a contract anniversary or within 21 days of a contract anniversary.
If my contract value falls to zero will I still get lifetime income payments until I die?
Yes. We will continue to pay you the guaranteed annual maximum each contract year. Also, if you chose withdrawals with the potential to increase, your income still enjoys the opportunity to increase even after the contract value is zero.
What's the biggest difference between the level income option and the increasing income option?
The level choice begins with bigger payments but does not increase over time. The increasing income option starts with a smaller payment, but can increase each year based on the performance of the indexes you select.
Are payments with the increasing income option guaranteed to increase?
No. That depends on your index allocations and the index return, if applicable.
Can I change my mind about which income option I want?
You’re able to change your mind, right up until you are ready to begin taking lifetime withdrawals. (That’s one of the great things about the Retirement Foundation Annuity). This allows you to tailor your income to your needs at the time you retire.
Is there another option for income?
Another way to receive income is by converting your annuity into a series of periodic payments. This is called annuitization, and there are several options available. However, if you choose to annuitize, you will no longer be eligible for partial withdrawals and lifetime income withdrawals and their benefits, including the increasing income potential. (Remember you paid for the built-in rider and you won't receive these benefits if you annuitize.)
Will I be able to access my money if I need it?
Partially. After your first contract anniversary, you can withdraw up to 10% of your money per contract year without a withdrawal penalty. But each withdrawal will proportionately reduce your lifetime income. There is a penalty to access more than 10% in the first seven years.
What if I have a medical emergency and need all my money?
You can buy the optional Flexible Withdrawal Rider that allows you to take out up to all your money, without penalty, if you are admitted to a nursing home, assisted living care facility, or hospital, and are there for at least 30 days in any 35-day period. It costs a monthly fee of 0.00833% (1/12 of .1%) of your account, and you have to sign up for it when you apply.
Will my beneficiaries receive a death benefit if I die before I start lifetime income withdrawals?
Yes. They will receive your annuity’s accumulation value, and it will never be less than the net premium.
If I die can my spouse continue the contract?
If your spouse is a joint owner or the sole beneficiary, s/he may choose to continue the contract or receive the lump-sum benefit. Lifetime income will continue only if the joint income option was selected.
Fees & Taxes
What fees do you charge?
We charge a 1.05% fee which pays for the built-in benefit rider that guarantees lifetime income. If you choose the optional Flexible Withdrawal Rider, you also pay a monthly fee of 0.00833% of the accumulation value.
Can the 1.05% annual fee reduce the value of my contract?
Yes. The 1.05% is assessed every year. In any year that your contract earns no interest, or earns less interest than the annual fee, the value of your contract will go down. But it cannot reduce the value of your income guarantee.
Can the cap reduce the value of my contract?
No. It cannot reduce the value of your contract but potentially it could limit how much the value of your contract can go up.
Is there a good reason not to withdraw 10% per year since there’s no penalty?
Yes. Every withdrawal, even when there’s no penalty, proportionately reduces your eventual lifetime income withdrawals. Annuities are designed to give you reliable income in the long term, not the short term.
Will the interest I earn be taxed?
It’s tax-deferred, so it won’t be taxed until you withdraw it, at which point it will be taxed as ordinary income.
Is the interest the only part of my money that will be taxed when I withdraw it?
It depends. If the money you used to purchase the annuity came from a tax-deferred account, then it too will be taxed as ordinary income.
Do the taxes change depending on how old I am when I withdraw money?
Yes. If you’re under 59½ years of age, there may be a 10% federal additional tax.
Why can’t I apply without creating an account?
The account gives you a secure place to share your personal data with us. It also allows you to complete the application a little at a time and come back later to finish, if you’d like. Your account houses your contract and allows you to update any information you need to throughout the life of the contract. It is both a safety feature and a convenience for you.
What’s a “needs analysis”?
It’s a process that tells us whether this annuity will make it easier to reach your retirement goals, or more difficult. If the answer is more difficult, we won’t sell you the annuity. Many factors determine whether an annuity may be right for you. Here are just a few of the reasons you may consider a fixed index annuity:
- You expect to live a relatively long life.
- You want the reassurance of knowing you’ll have a source of regular income in retirement.
- You want to protect your annuity's value from losses in the stock market.
- You want the ability to address the impact that inflation could have on your standard of living.
- You want your retirement savings to grow tax-deferred.
- You want a way to transfer some of your wealth after your death, while avoiding the costs and delays of the probate process.
Will I have to sign a contract?
An annuity is a contract between you and Allianz Life, but you're not buying stocks, bonds, or any other securities. You’re buying the terms of the contract. A signature is required on the application.
Is ReadySet an insurance company?
ReadySet is an online platform created by Allianz Life Insurance Company of North America to help people who do not want to work with a financial professional set up and manage their own financial and retirement solutions.
If I buy an annuity from ReadySet, am I getting an Allianz Life annuity?
Yes. The Retirement Foundation Annuity is issued and backed by the financial strength of Allianz Life Insurance Company of North America. Allianz Life has been the leading provider of fixed index annuities for 16 of the past 17 years (2000 – 2016).1
1 Wink’s Sales & Market Report is published by Wink, Inc., 2Q 2017.
Is Allianz Life Insurance Company of North America a public company?
No, it is owned by a public company, Allianz SE, which is a public company that has a stock exchange listing in Xetra and at all German stock exchanges.
Is Allianz Life Insurance Company of North America a strong enough company to guarantee my retirement income?
Independent financial ratings agencies regularly verify our financial strength. See the ratings from Standard & Poor’s, A.M. Best, and Moody’s for both Allianz SE and Allianz Life.
Strong companies can fail if they go out on a limb; what is the Allianz Life investment philosophy?
Our goal is steady, reliable performance over the long term. We base it on diversification across high-quality, fixed income assets, 99% of which have a Standard & Poor’s rating of AA (Very Strong) or higher, efficient matching of assets to liabilities, high liquidity, and our risk management expertise. See our investment portfolio mix.