October 27, 2022

Fixed Annuities: Your Questions Answered

We have had several inquiries about fixed annuities and their importance; here are answers to some of the most commonly asked questions.

What is an annuity?

An annuity is a long-term contract that is issued by an insurance company. Some have a fixed rate of return and others are tied to stock market performance.  


What are the phases of an annuity?

There are two distinct “phases.” During the accumulation phase, the money you put into the annuity earns interest. During the annuitization phase, the funds in the annuity are converted into periodic payments that can last for life. BetterLife offers policies that enable you to participate in either or both phases.  


What are the types of annuities BetterLife offers?

We offer fixed annuities, which guarantee minimum interest rates. This means you earn at least the guaranteed minimum interest rate on any funds you put into your annuity, so your money can grow over time.

BetterLife offers several types of fixed annuities. One type allows ongoing contributions so that you can add money to your annuity over time. Some of our other annuities require a single premium (one-time contribution) with an initial rate “locked-in” for 2-5 years. BetterLife also offers an annuity that converts your premium payment into an immediate “payout” or income stream. BetterLife’s annuity options can provide payments to you for a specified number of years or throughout your lifetime. 


Why is an annuity a good choice?

Annuities can be a good choice, particularly fixed annuities. They provide guarantees* like minimum interest rates or a guaranteed income stream. Annuities also provide stable and predictable returns. This can be a significant advantage compared to market-driven investments, which can have a lot of volatility. Lastly, only an annuity can be turned into an income stream you cannot outlive.


Why choose an annuity over a bank account or CD?

It is important to have stable accounts as a base for your overall investment strategy. Fixed annuities are a valuable option, and at BetterLife, our annuities provide competitive interest rates.

Similar to a bank account, some annuities allow you to make additional contributions (most CDs do not). But unlike a CD or bank account, annuities in the accumulation phase are tax-deferred; therefore, no income tax is due while the earnings stay in the annuity. Other advantages of annuities include the ability to name a beneficiary and bypass probate, and the ability to withdraw some cash without penalties during the accumulation phase.


Can I take money out of an annuity during the accumulation phase?

The answer is yes, with a few points to keep in mind:

  • Surrender charges can apply for a number of years, according to the details found in the annuity contract.
  • Surrender charge free withdrawals are available on all BetterLife annuities in the accumulation phase. The amount available may be the accrued interest or a stated percentage of the account value each year, see policy contract for specifics.
  • Withdrawals made after the stated surrender charge period are not subject to surrender charges.
  • All withdrawals may be subject to income taxes on the amounts that are considered a withdrawal of earnings. Withdrawals made prior to age 59 ½ may be subject to a 10% IRS penalty.**


Before the Western Fraternal Life and National Mutual Benefit merger, I purchased an annuity. Does the merger change my interest rate?

No, the merger did not affect your annuity’s interest rate. The initial rate lock is guaranteed for the period of time indicated from when you purchased your annuity. Once that rate lock period is complete, the annuities earn the “portfolio rate” for that annuity type and can be adjusted monthly by BetterLife. The rate of return is guaranteed never to be less than the minimum interest rate stated in the annuity contract.


Does the merger change anything else about my annuity?

The only thing the merger has changed is the name; your annuity is now called a BetterLife annuity instead of a Western Fraternal Life or National Mutual Benefit annuity.


How are my taxes affected by an annuity?

During the accumulation phase, annuities provide tax-deferred growth. As long as your money remains in the annuity, no taxes are due. Therefore, tax obligations can be lower during the accumulation phase, allowing the policy owner to grow more money in the annuity. When money is withdrawn from an annuity, earnings become taxable at the current tax rate. It is important to ask a tax professional about your individual situation.


Will my annuity interest rate change?

For accumulating annuities, there is an initial period of time (this is stated in the contract) in which the interest rate will not change. After that time, annuity interest rates can fluctuate with BetterLife’s monthly portfolio rate based on annuity type but are guaranteed never to be less than the minimum interest rate stated in the contract.

For annuities in the annuitization phase, the regular payment is locked in and will not change over time.


Who should I talk to if I have more questions about annuities?

Reach out to your local BetterLife agent for more details and answers to your questions. If you aren’t sure who your local agent is, please contact the Home Office (800-779-1936 or memberservice@betterlifeins.com) we will happily assist.


*Guarantees are backed by the financial strength and claims-paying ability of BetterLife.
** Taxes on the earnings are due at the time of withdrawal/distribution. Consult a tax advisor for specifics that may apply to you.


BetterLife is a different kind of life insurance company. Schedule an appointment with one of our expert agents to learn more about what makes us different and why you should become a member today!