www.legacyannuity.com . .

Legacy's clients have a reason to smile . . .



Accumulated assets: Accumulated assets represent the total value of assets accumulated through an investment vehicle.

Accumulation phase or Accumulation period: The time when the owner of a deferred annuity makes payments into the contract and accumulates assets.

Annual contract fee: An annual fee, typically $30 or $40, paid to the insurance company for administering the contract. The fee is often waived for contracts with high account values.

Annuitant: The person(s) upon whose life annuity payments are based. Often, but not always, the annuitant and the owner are the same person.

Annuitization: The process of converting an annuity from an accumulation vehicle into a guaranteed (or variable, if a variable immediate annuity is selected) stream of income.

Annuity consideration: The payment, or one of the subsequent payments, that a policyholder makes for an annuity.


Beneficiary: The person or financial instrument (e.g., a charity or trust fund) named in the contract as the recipient of the account value, or the death benefit, whichever is greater, in the event of the contract owner’s death.

Bonus credit or Bonus rate:
Some fixed annuity contracts offer a higher interest crediting rate in the first year of the annuity contract. After the first year, the rate drops back to a rate consistent with the current market. Some variable annuities offer an additional credit to the annuity account when the annuity is purchased.

Broker/Dealer: NASD member firms that act as securities dealers or brokers, or perform both functions.


Capital gains: The gain in value of certain investments over and above the initial amount paid into an investment. Capital gains are subject to a different tax rate than ordinary income. In many cases, the capital gains tax rate is lower than the income tax rate for an individual.

Cash value: The amount available in cash upon surrender of a permanent life insurance policy. Also known as cash surrender value.

Commission: Fees charged by financial professionals to buy or sell securities.

Contract fee: A flat fee charged by an insurance provider to cover administration costs on a variable annuity. This fee is charged on a yearly basis.


Death benefit: The payment made to the beneficiary upon the death of the contract owner or annuitant. 4
Deferred variable annuity: A type of deferred annuity in which funds are placed in underlying investments and money accumulates on a tax-deferred basis until it is withdrawn or converted to income at some later date. The account value fluctuates based on the performance of the investments.
Diversification: Allocating your assets among various conservative, moderate and aggressive investments in order to reduce the inherent risks of investing.


Equity indexed annuity: This annuity typically provides the contract owner with an investment return that is a prescribed percentage of the return of an index, such as the S&P 500, while guaranteeing no less than a stated fixed return on the investment.


Forced annui tization: The automatic liquidation of an annuity upon the contract owner’s reaching a specific age, as defined by the insurance provider.

“Free look” period: The “trial period” during which you can freely evaluate your investment. You can exit from your variable annuity contract during this period without incurring any penalties. By NASD regulation, all variable annuities are required to have a free look period. The length, however, is determined by the provider.

Free withdrawal: A stipulation in most deferred annuities that allows for early withdrawal without an insurance company-imposed penalty. The maximum withdrawal is usually up to 10% of the annuity value. Tax penalties may apply if you withdraw assets before reaching age 59 ½.


General account: The account in a variable annuity that is backed by the issuing insurance company, and in which a guaranteed interest rate is credited, and in which current market rates (if higher than the minimum guaranteed rate) may also be credited to the account.

Global variable fund: One of several options for investment within a variable annuity, this type of fund invests in securities throughout the world, sometimes in developing nations, but mostly in developed markets such as the United States.

Growth variable fund: One of several options for investment within a variable annuity, this type of variable fund invests in companies that the investment manager believes are likely to grow based on current market conditions.

Immediate annuity: An annuity that is purchased with a single lump sum, with payments beginning within a short period – less than 13 months. Immediate annuities can be fixed or variable.

Income variable fund: One of several options for investment within a variable annuity; sometimes referred to as an “equity income” variable fund. The goal of this type of variable fund is to invest in companies or asset classes that the investment manager believes will deliver a steady stream of income to the fund, often through dividends.

Index variable fund: One of several options for investment within a variable annuity, this type of variable fund invests in an array of companies that are part of a major market index, such as the S&P 500, in order to replicate the performance of the index.


Joint and survivor annuity: An annuity in which payout's are made to the owner for life and, after the owner’s death, to the designated beneficiary for life.


Life annuity: Annuity payments that are guaranteed to continue for the life of the annuitant.


Money market fund variable fund: One of several options for investment within a variable annuity, this type of variable fund focuses on investments in short-term cash market instruments, such as CDs, short term corporate debt, and Treasury notes.

Mortality and expense risk fee: The M&E fee pays for three important insurance guarantees:
The ability to choose a payout option that provides an income that cannot be outlived at rates set in the contract at the time of purchase.

A death benefit to protect beneficiaries.

The promise that the annual insurance charges will not increase


NASD (National Association of Securities Dealers): A self-regulatory body of securities brokers/dealers. The NASD is responsible for regulating the securities, trading, and sales activities of its members and for addressing, among other matters, consumer complaints, the examination of securities firms, and the licensing of financial professionals. Variable annuity sellers are regulated by the NASD under rules approved by the Securities and Exchange Commission (SEC).

Non-qualified plan: In a non-qualified tax deferred plan, such as an annuity outside of a retirement plan, money can only be invested after income taxes are applied. Contributions grow in the account on a tax-deferred basis. Taxes are incurred on only the earnings or growth withdrawn from the account.



Payout phase: The phase of the annuity in which an insurance provider makes payments to you, the annuitant, according to an agreed-upon schedule. This is also known as the “annuitization period.”

Premium: A contribution or payment into an annuity.

Principal: Both the initial investment and any ongoing contributions made into an annuity.

Prospectus: A legal document that describes the financial details of a variable annuity, as well as the risks. The Securities and Exchange Commission (SEC) requires that a prospectus be presented to consumers prior to purchasing an annuity.


Qualified tax-deferred plan: A qualified tax-deferred plan is a an investment plan approved by the Internal Revenue Service (IRS) for special tax treatment. Examples of qualified tax-deferred plans are IRAs and 401(k) plans, where you don’t pay income tax on your contribution, or on interest or profit earned. Taxes at ordinary income tax rates are incurred on any withdrawals from the account. In some tax-deferred plans (401(k) and 403(b), you can also choose to make contributions after-tax, with withdrawals received tax-free. The IRS restricts contributions and any withdrawals taken before age 59 ½.


Registered Representative: The employee or an associate of an NASD member firm who gives advice on which securities to buy and sell, and who collects a percentage of the commission income he or she generates.

Rider: An amendment to an insurance policy that expands or restricts the policy’s benefits or excludes certain conditions from coverage.

Risk: The possibility that an investment will not earn an anticipated return.
Risk tolerance: How much risk of loss you are willing to take in order to achieve an investment goal, such as the potential for a higher rate of return.


Savings period: The period in which the owner of a deferred annuity makes payments and accumulates assets.

Surrender charge: The cost to a contract owner for early redemption of a contract. The charge is usually not applied after the contract is 5 to 7 years old.

Surrender charge period: A time period imposed by the variable annuity provider, during which you will be subject to a withdrawal charge for any funds that are withdrawn (generally after a “free corridor”).


Value variable fund: One of several options for investment within a variable annuity, this type of variable fund invests in companies the investment manager believes are undervalued in the marketplace.

Variable annuity: A contract in which the premiums paid are invested in funds offered by the insurance company, including bond and stock funds. The selection of funds is guided by the level of risk assumed. The account value reflects the performance of the funds that the owner has chosen for investment. Variable annuities have historically reflected the growth and performance of the economy and served as a hedge against inflation, although no one knows whether they will continue to do so.


Withdrawal: Distributions from an annuity other than scheduled annuity payments


Legacy Annuities ©2007
Telephone 781-826-2120
125 Church Street Pembroke MA 02359