Index variable annuities: growth potential with some protection

Index variable annuities can help you accumulate money for retirement and help provide income after you retire. An index variable annuity may be a good choice if you’re willing to take on some market risk with the opportunity to grow your assets.

Six reasons to consider an index variable annuity (IVA)

Diversify your portfolio

Many investors rely on stocks for growth potential and bonds for protection. Index variable annuities can help further diversify your overall financial strategy by offering a balance of performance potential with a level of protection against market downturns. (But remember that diversification does not guarantee a profit or protect against a loss.)

Participate in market gains

Allianz IVAs can give you growth potential through market participation to help you accumulate for retirement. They offer you a combination of traditional variable investment options plus multiple innovative index strategies.

Choose a level of protection

Our innovative index strategies can help you aim for greater potential or a level of protection, depending on your risk tolerance and long-term goals. You can also blend two or more index strategies for a more balanced approach.

Grow tax-deferred

An IVA is an insurance product that gives you the opportunity to build a portion of your assets tax-deferred. This means you don’t have to pay taxes on any gains until you take money out of your annuity.

Get flexibility

Your financial needs and goals can change over time. That’s why IVAs offer a variety of index strategies – also called crediting methods – and flexible options for receiving income. IVAs also have traditional variable options, so you can change investment direction at little or no cost.

Leave a legacy

IVAs pay your loved ones a death benefit during the accumulation phase if you pass away before you start taking scheduled annuity payments. (And in most cases, the death benefit is not subject to probate.)

See how index variable annuities work.

Index variable annuities have two phases: the first is the accumulation phase, during which your annuity can grow tax-deferred.

You buy an index variable annuity.

An annuity is simply a contract between you and an insurance company. According to the terms of your annuity, you make one or more purchase payments to an insurance company. And in return, they issue you a contract with certain guarantees that are either built into the contract or available through an optional rider for an additional cost.

You customize your investment.

Through their index strategies, index variable annuities allow you to trade some potential gains from market growth in exchange for a level of protection from down markets. IVAs do this by giving you a choice of index options – along with variable options – so you can choose your allocations based on your goals and risk tolerance. Your contract’s value may increase or decrease depending on the performance of the index and variable options you choose.

Your annuity grows tax-deferred.

You don’t have to pay taxes on the gains your contract earns until you take money out of your annuity. This tax deferral can help the money in your annuity accumulate faster.

The second phase begins when you start taking income. We call this the distribution phase.

Your annuity provides payout options.

After a period of time specified by your contract, you may then receive the amount allowed by your IVA contract in a lump sum, over a set period of time, through annuitization payments, or as income for the rest of your life. Some index variable annuities even provide the opportunity for increasing income through optional riders that are available for an additional cost.

Is an Allianz index variable annuity right for you?

Ask your financial professional whether one of these may be appropriate for your unique needs:

Allianz Index Advantage® Variable Annuity

Concerned about accumulating for retirement? Our core index variable annuity can give you long-term growth potential through market participation – plus a level of protection – by combining traditional variable options with multiple index strategies.

Allianz Index Advantage Income® Variable Annuity

Seeking a balance between accumulation and income? Get the long-term growth potential of Allianz Index Advantage® – plus the Income Benefit rider, which is automatically included in the contract for an additional fee. This can give you more ways to take income, including the opportunity for guaranteed increases in your lifetime income percentage.

Allianz Index Advantage Income ADV® Variable Annuity

Seeking a modern approach to managing transition and longevity risk? Designed to work within an advisory platform, this product can give you long-term grown potential plus more ways to take income and the opportunity for income increases through the Income Benefit rider, which is automatically included in the contract for an additional fee.

Allianz Index Advantage NF® Variable Annuity

Are you sensitive about fees? This product offers features and benefits similar to Allianz Index Advantage® (see above), but with no product fee. (However, it does include a 1.25% mortality and expense risk charge on the variable options.)

Allianz Index Advantage ADV® Variable Annuity

Seeking to diversify your portfolio? Designed to work within an advisory platform, here’s one way to round out your overall financial strategy with a death benefit during the accumulation phase, a level of protection from market loss, and tax-deferred growth.

Frequently asked questions

Why haven’t I heard of index variable annuities (IVAs) before?

Allianz introduced index variable annuities, also known as registered index-linked variable annuities (RILAs) in 2017. We created this product category because some of our customers wanted growth potential, but still needed a level of protection from market downturns. Other insurers have since introduced their own versions of RILAs, but Allianz remains an industry leader in indexed products.

I already own stocks and bonds. Why consider an IVA?

Annuities can help further diversify your portfolio and manage the balance between risk and reward. Bonds are being challenged by low yields in our current market environment – and could fare even worse if interest rates rise. As a result, you may need to rely more on the stock market to get the returns you need. Unfortunately, you may not have time to rebuild if there’s a market downturn when you’re close to (or in) retirement. That’s why some people may turn to index variable annuities as part of their diversification strategy. IVAs give you an opportunity to participate in some of the market’s growth potential, with some protection from the downside risk. Keep in mind that diversification does not ensure a profit or protect against loss.

What are the pros and cons of index variable annuities?

IVAs offer flexibility and unique benefits, but they do have contract fees and charges – and some exposure to market risk. On the pro side, IVAs generally don’t limit how much money you can place in the contract, and they offer tax-deferred growth potential. Plus, they offer a death benefit before you annuitize the contract, along with a variety of index options that can give you flexibility to help address your unique financial goals. But IVAs can involve some investment risk due to market downturns, including loss of principal, and contract values fluctuate daily. Most index variable annuities also have a deferral period. This means that if you take money out sooner than the specified waiting period (usually between three and 10 years), you could incur a withdrawal charge. Also, withdrawals before the annuity owner turns 59½ will incur an additional 10% federal additional tax.

What is the difference between purchase payment and principal?

Purchase payment refers to your initial and additional purchase payment(s), while principal includes any gains earned by your contract. You buy an Allianz annuity with one or more purchase payments. The purchase payment represents the foundation on which the value of your annuity can grow. Any other money your annuity earns — for example, through credits or market gains – is added to your contract. We refer to this new combined amount as your principal.

Can index variable annuities lose value?

Yes, they can. Index variable annuities have some characteristics of both fixed index annuities (which are designed to help protect the money in your annuity from market volatility) and variable annuities (which do have market risk). Allianz IVAs offer several index strategies that can help you find a balance of risk and opportunity that may be appropriate for your financial goals. However, it’s important to remember that you could see a substantial loss during an index period if the index declines more than the level of protection your contract offers. And if you do see a substantial loss during an index period, you may not be able to participate fully in a subsequent market recovery due to the capped upside potential in subsequent index periods.

What is an allocation option?

The variable options and index options (which are a combination of an index strategy, an index, and the time period for measuring index performance, or the term) your contract offers are referred to as your allocation options. IVAs allow you to place your contract’s value in several variable options and various index options. The index options help determine how much credit your contract earns in a given contract year. Keep in mind that an allocation to the index options, however, is not a purchase of shares of any stock or index fund or a direct investment in an index – and that no single index option consistently delivers the most return under all market conditions. These unmanaged indexes are not intended to represent specific mutual funds. Individual results may vary according to transaction costs and taxes. Investors cannot invest directly in an index.

Do index variable annuities have required minimum distributions (RMDs) at RMD age?

Not if your index variable annuity is nonqualified (held outside a retirement account). However, if you purchase an index variable annuity within an Individual Retirement Account (IRA), you’ll have to take RMDs beginning at RMD age. You should also be aware that some annuity contracts require you to start distributions at a certain age (generally between 85 and 100) – so it’s important to ensure that the contract meets your long-term goals. A tax advisor can help you understand the tax implications of buying an index variable annuity.

Explore another Allianz annuity option.

Fixed index annuities

A fixed index annuity may be a good choice if you want the opportunity to earn indexed interest, but don’t want to risk losing money in the market.

Check the background of Allianz Life Financial Services, LLC on FINRA's BrokerCheck.

As with any investment vehicle, index variable annuities are subject to risk – including possible loss of principal. Investment returns and principal will fluctuate with market conditions so that contract values, upon distribution, may be worth more or less than the original cost.

Purchasing an annuity within a retirement plan that provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefit. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan.

Withdrawals will reduce the contract value and the value of any potential protection benefits. 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.

For more complete information about Allianz index variable annuities and any available variable options, call your financial professional or Allianz Life Financial Services, LLC at 800.624.0197 for a prospectus. The prospectuses contain details on investment objectives, risks, fees, and expenses, as well as other information about the index variable annuities and any available variable options, which you should carefully consider. Please read the prospectuses thoroughly before sending money.

Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF

Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297, and distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA. (L40538, L40538-NF, L40538-IAI, L40538-IADV)

Product and feature availability may vary by state and broker/dealer.

Index variable annuities: growth potential with some protection

Index variable annuities can help you accumulate money for retirement and help provide income after you retire. An index variable annuity may be a good choice if you’re willing to take on some market risk with the opportunity to grow your assets.

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