John Marcheso and Associates

Annuities are investment vehicles that are issued by insurance companies, and are generally designed for the accumulation and eventual distribution of retirement assets.¹ If the annuity is a "fixed annuity," the owner's investment becomes part of the insurance company's general account; a fixed interest rate based on the investment performance of the insurance company's investment portfolio, is declared by the insurance company, and is subsequently credited to the annuity account.

If the annuity is a "variable"² rather than a "fixed annuity," the purchaser's investment may be invested in one or several of the "subaccounts" within the annuity. These subaccounts generally consist of a portfolio of stocks or bonds.
The subaccounts are managed by professional money managers, their assets are kept in separate accounts rather than the general account of the insurance company and thus the return is based on the performance of the subaccounts; there is no guaranteed rate from the insurance company.³ All annuities offer distribution options designed to provide investors with a systematic stream of income.⁴ Annuities allow investors:

To defer taxes on the growth of the investment until it is withdrawn converted into periodic payments (annuitized) for income.
To provide for the payment of a death benefit to a designated beneficiary (avoiding probate).
Access to professional money managers and the ability to direct one's own investments within the policy (variable annuities only).
Asset allocation models and the opportunity to transfer assets at little or no cost between the subaccounts of the policy (variable annuities only).
Fixed returns for specified periods of time, guaranteed by the respective insurance companies (fixed accounts only).
Payout options that can provide income for life (for retirement).

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1. There may be statutory penalties on early withdrawals from annuities before the age of 59 ½.

2. Shares of variable annuity subaccounts are subject to investment risk, including possible loss of principal amount invested, and will fluctuate in value. An investor may ultimately receive more or less than originally invested.

3. Many variable annuities offer a “fixed” subaccount option which is guaranteed by the insurance company with its assets becoming part of the general account. Investors should consult the prospectus for details on any specific variable annuity.

4. A contingent deferred sales charge may be assessed against the contract value of a variable product if the policy is surrendered early. The termination value may be more or less than the amount of the premium payments made to the contract.

5. Guarantees are offered by the insurance company and are subject to the claims paying ability thereof.