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FAQs about annuitiesWhat are the advantages of an annuity? Tax-deferred growth: An annuity accumulates interest on a tax-deferred basis, until funds are withdrawn. This can add significantly to the value of the account when compared with a taxable plan. Tax-deferred growth means earning interest on the principal, plus earning interest on the interest, plus earning interest on the money that would have been paid in taxes. Competitive current interest rate: The current interest rate payable on an annuity is a tax-deferred rate, as compared to a taxable CD rate. The current interest rate payable on a Harleysville Life annuity will change only once every 12 months. This allows for the strength of maintaining a strong rate for successive one-year periods, but also offers the flexibility to take advantage of rate changes each year. Safety/guarantees: An annuity is a safe plan for accumulating funds. Harleysville Life annuities feature a minimum guaranteed interest rate to ensure strong growth, no matter what.
Is the current interest rate the most important consideration when choosing an annuity? No. While the interest rate is an important factor, an annuity is a long-term retirement plan and consideration should be given to the long-range interest rate for the plan. Since rates change, the best approach is to review the company’s interest rate history. How stable has the rate been over the last several years? Does all the money in an annuity earn the same rate, or is there different rates for “old” and “new” money? Harleysville Life uses a “portfolio” or “all money” rate for annuity plans, meaning all funds in an annuity earn the same rate of interest.
Do I have access to my funds in the annuity? An annuity is designed to accumulate funds until retirement. Withdrawals prior to age 59-1/2 may incur a 10 percent IRS penalty (exceptions apply). In addition, a decreasing surrender charge is applicable in the early years of the annuity. This surrender charge is waived, however, for withdrawals up to 10 percent of the policy value after the first year. This allows access to a portion of the account value after the first year without a surrender charge.
Are there other considerations when selecting an annuity plan? Annuities often offer special benefit riders that differentiate the plan from other annuities. But one of the most important considerations when selecting an annuity is the strength of the company behind the plan, and how well they treat their current annuity clients. This is an excellent indication of future performance. Do you have questions about Harleysville Life? Contact us at lifeindividualsales@harleysvillegroup.com.
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