What an Annuity Is

An annuity is a contract between you and an insurance brokerage. In exchange for a premium — paid either as a lump sum or over time — the insurance brokerage agrees to provide future payments according to the terms of the contract. Annuities are most often used by individuals planning for retirement, since they are one of the few financial products that can provide income for life. Different annuity types serve different purposes: • Fixed annuities offer a guaranteed interest rate for a defined period and a guaranteed minimum income. • Indexed annuities credit interest based on the performance of a market index (such as the S&P 500), subject to caps, participation rates, or spreads. They typically include a floor that protects against negative crediting. • Variable annuities allow the account value to be invested in subaccounts whose values fluctuate with market performance. Variable annuities are securities and require a securities license to recommend; our brokerage focuses on fixed and indexed products. All annuity guarantees are based on the claims-paying ability of the issuing insurance carrier.

Tax Treatment and Withdrawals

Annuities are generally tax-deferred during the accumulation phase, meaning interest credited to the contract is not taxed until it is withdrawn. When you take income from an annuity, the portion attributable to gains is generally taxed as ordinary income. Withdrawals taken before age 59½ are typically subject to a 10% federal tax penalty in addition to ordinary income tax, with some exceptions. Most annuity contracts include surrender charges during the early years of the contract. These charges decrease over time according to a defined schedule. Some contracts also include a Market Value Adjustment (MVA), which can increase or decrease the surrender value depending on interest rate movement. This is a high-level overview. The specific tax treatment of any annuity depends on the contract type, how it was funded, and your individual situation. Please consult a qualified tax advisor

Our Approach

Foster’s Solutions And Services is a carrier-agnostic insurance brokerage. We work with a network of annuity carriers and review options across that network to identify products that fit each client’s needs. We provide clear explanations of: • How each contract works • What it costs (premium, fees, charges) • What surrender charge schedule applies • What the guarantees actually mean • What riders are available and what they do As licensed insurance brokers, we receive compensation from the insurance carrier when an annuity is placed. The specific compensation varies by carrier and product. We disclose this in writing as part of any annuity recommendation, consistent with California’s Best Interest Standard for annuity transactions.

Is an Annuity Right for You?

Annuities are not right for every situation. They work best when matched to a specific need — guaranteed retirement income, principal protection during accumulation, or tax-deferred growth as part of a broader plan. The only way to know whether an annuity fits your situation is to look at your full picture: your retirement timeline, other assets, income needs, tax situation, and what role this product would play in your overall plan. Call us at (562) 619-8783 to schedule a consultation. There’s no cost and no obligation.