A Closer Look at Fixed Annuities

1. A Closer Look at Fixed Annuities  ADR-1352

2. Today we will discuss the following: • Retirement trends and outlook • What is an annuity? • The basic benefits of annuities • How annuities are used as a retirement income strategy • The annuity process

3. Retirement Trends Any transaction that involves a recommendation to liquidate a securities product, including those within an IRA, 401(k) or other retirement plan, for the purchase of an annuity or for other similar purposes, can be conducted only by individuals currently affiliated with a properly registered broker/dealer or registered investment advisor. If your financial professional does not hold the appropriate registration, please consult with your own broker/dealer representative or registered investment advisor for guidance on your securities holdings. We’re living longer Fewer Americans are covered by traditional pension plans Minimum age for taking Social Security has risen

4. Retirement Outlook • 28% of Americans have no confidence they will have enough money to retire comfortably • Since people are living longer, it is tougher to stretch retirement savings • A male who reaches age 65 in 2013 is expected to live an additional 20.5 years • A female turning 65 now expected to live an additional 22.7 years

5. Retirement Solutions • Equity Market Risk • Health Costs Risk You may be searching for: • Supplemental retirement income • How to establish guaranteed income for life • How to address key risks • Longevity Risk • Withdrawal Rate Risk Annuities can meet these goals and be a valuable part of your overall financial strategy.

6. What is an Annuity? Annuities are long-term products of the insurance industry designed for retirement income. They contain some limitations, including possible withdrawal charges and a market value adjustment that could affect contract values. • An annuityis a contract between an individual and a life insurance company. In exchange for premiums paid, the funds can accumulate in the contract on a tax deferred basis and are available to payout guaranteed lifetime income.

7. Uses of an Annuity • Purchased by individuals • To supplement retirement income • For tax deferred growth • Purchased by businesses • Tax qualified plan for all employees • Sometimes as a nonqualified plan

8. Benefits of an Annuity Annuities can help: Ensure that you have a retirement income stream Create a guaranteed lifetime income flow in retirement Provide financial protection against the risk of living too long and running out of money Provide estate tax advantages

9. Common Features • Guaranteed income or withdrawal option for a number of years or for life • Any remaining value, and in some cases enhanced value, is paid to beneficiaries • Protection • Premium and credited interest are protected from potential market downturns • Annuity contract earns additional interest • Fixed interest rate • Indexed interest rate • Combination

10. Fixed Annuities Fixed annuities are insurance products Insurance company makes fixed payments to annuitant for term of contract Insurance company guarantees both earnings and principal Can help provide a retirement income stream during those years

11. Two Types of Fixed Annuities • Immediate • Guaranteed lifetime income starts within one year of annuity purchase • Deferred • Designed to store and build contract value for retirement income • Access retirement income in a variety of ways in the future • Guaranteed lifetime income continues as long as you live

12. Deferred Annuities Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. • Can defer income interest earned during the accumulation phase from taxes until money is withdrawn • No income requirements to buy an annuity • No limits on how much money is put in • Not required to take money out until age 70 ½ • Withdrawals before age 59 ½ are generally subject to 10% penalty fee • All withdrawals are subject to ordinary income tax

13. Fixed Indexed Annuities Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; neither an Index nor any indexed annuity is comparable to a direct investment in the equity markets. Earns interest based on changes in a market index, which measures how the market or part of market performs Interest rate is guaranteed to never be less than zero, even if market goes down

14. The Annuity Process Premiums (Accumulation Phase) Tax deferred growth Income (Payout Phase) Policy Owner Insurance Company Withdrawals before age 59 1/2 will be subject to ordinary income tax and may be subject to a 10% federal additional tax.

15. Phases of an Annuity Premiums (Accumulation Phase) Tax deferred growth Income (Payout Phase) Insurance Company Policy Owner Death benefit paid to designated beneficiary(s) Designated in Contract Beneficiary(s) Withdrawals before age 59 1/2 will be subject to ordinary income tax and may be subject to a 10% federal additional tax.

16. Withdrawals Withdrawals of taxable amounts are subject to income tax and may also be subject to a 10% IRS penalty tax if withdrawn before age 59½. Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. • You have the ability to take withdrawals (called “partial withdrawals” or “partial surrenders”) from the contract value • Doing so may possibly incur a withdrawal charge • As the owner, you can terminate the contract and receive the accumulated value, less any surrender charge.

17. Payout Options Note: * Annuitization is a permanent election. • Annuitization* • By annuitizing a deferred annuity contract, an exchange is made from accumulated value to generating a guaranteed income stream. • Guaranteed Minimum Withdrawal Benefits • An option that can be purchased that allows the policyholder to take percentage withdrawals from the annuity contract for life that can be stopped and started. • Required Minimum Distributions (RMD) • An RMD, or Required Minimum Distribution, is the amount of money that retirees 70½ and older are required to withdraw from their tax-qualified plans

18. Hypothetical ExampleHow a Guaranteed Minimum Withdrawal Benefit (GMWB) Could Work Bill and JoAnn purchase a fixed annuity with $250,000 premium when Bill and JoAnn are both 55 years old. They elect a Guaranteed Minimum Withdrawal Benefit option and receive an 8% bonus immediately upon purchase. They plan on taking income from the annuity when Bill reaches age 70. This scenario is hypothetical only and is not intended to be a predictor of actual results. Withdrawals may be subject to withdrawal charges and will reduce the death benefit and optional benefits. The characters in this example are fictional only. Your actual experience will vary.

19. Hypothetical Example For each year Bill and JoAnn wait to take income, the Benefit Base of the GMWB Rider can grow 7% compounded annually. This scenario is hypothetical only and is not intended to be a predictor of actual results. Withdrawals may be subject to withdrawal charges and will reduce the death benefit and optional benefits. A decrease in the Benefit Base will reduce future Lifetime Income Amount values. If the excess withdrawal is equal to the Contract Value, future Lifetime Income Amounts will be eliminated. The characters in this example are fictional only. Your actual experience will vary.

20. Guaranteed Minimum Withdrawal Benefit • Carrier guarantees payouts to you for as long as you live • Payouts can also continue for your spouse • May provide for guaranteed payment amount to increase • If you require certain types of care • If you need assistance with Activities of Daily Living

21. The Annuity Death Benefit • Annuities are paid to your beneficiaries quickly • Bypass delays and expenses of probate • Guaranteed Minimum Death Benefit • Annual fee is deducted from the annuity’s value • Provides your beneficiaries with an amount in excess of the annuity’s basic guaranteed minimum value

22. Annuity Limitations Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax.

23. Summary of Annuity Benefits Withdrawals will reduce the contract value and the value of any protection benefits. Additional withdrawals taken within the contract withdrawal charge schedule will be subject to a withdrawal charge. All withdrawals are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal additional tax.

24. The information contained herein is based on our current understanding of federal tax laws as they relate to life insurance and/or annuities or other subject matter discussed. These laws are subject to change in the future. This information is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please consult your own personal advisor for legal, tax or accounting advice. Annuities are insurance products backed by the claims-paying ability of the issuing company; they are not FDIC insured; are not obligations or deposits of, and are not guaranteed or underwritten by any bank, savings and loan or credit union or its affiliates; are unrelated to and not a condition of the provision or term of any banking service or activity. Guarantees are based on the strength and claims paying ability of the issuing insurance company. Product features vary by state and restrictions may apply, including possible withdrawal charges. Positive index adjustments may be limited to a monthly maximum or participation rate. Tax-deferred interest accumulation offers no additional value if the annuity is used to fund an IRA under current tax law; additionally, tax deferral may not be available if the owner of the annuity is not a natural person such as a corporation or certain types of trusts. Disclosures