Understanding
Annuities
Annuities issued by Pruco Life Insurance Company (in New York, issued by Pruco Life
Insurance Company of New Jersey) and The Prudential Insurance Company of America.
0160994-00006-00 Ed. 11/2012
Meeting the challenges of retirement
with today’s annuities
You may be faced with unprecedented challenges when it comes to preparing for
retirement. With the future of Social Security uncertain and traditional employer
pension plans becoming a luxury of the past, the burden of financing retirement is
now falling on the shoulders of individuals. As a result, planning has become even
more critical. If you’re concerned about having enough money to live the lifestyle
you’ve been envisioning for retirement, an annuity could help.
There are several different types of annuities to help meet your individual needs
and objectives. And in response to the changing needs of retirees and ongoing
market volatility, today’s annuities have new innovative features called optional
living benefits. Available for an additional fee, living benefits can provide lifetime
income guarantees with added protection and flexibility. It is worth taking a fresh
look with your financial professional to see how today’s annuities can play a role in
your retirement income plan.
2/ 16
table of contents
What is an annuity? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
An annuity is a contract between you and an insurance company. An annuity gives you an opportunity
to invest in order to help supplement your assets with a guaranteed stream of income you can’t outlive.
Different types of annuities for different needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
You can choose from several different types of annuities to help meet your retirement income needs.
How annuities work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Annuities have two phases: accumulation and distribution.
How much does an annuity cost? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and expenses will vary depending on the type of product and any optional benefits you may elect.
For a variable annuity, see the product prospectus for costs of the annuity and other optional costs.
For a fixed annuity, refer to the annuity’s supporting sales material or speak with your financial professional.
7
When you are ready to take income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
You have options when it comes time to take income from your annuity.
Invest with Guarantees®* with variable annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Today’s variable annuities have optional benefits that lock in highs to protect your income base
from market volatility and can help you enjoy guaranteed retirement income for life.
9
Types of optional Guaranteed Living Benefits (GLBs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Most variable annuities offer you the opportunity, at an additional cost, to add an optional living benefit
to your contract.
10
Death benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Most annuities offer a basic death benefit for your beneficiaries. Many variable annuities also offer optional
death benefits for an additional fee.
11
Tax advantages of an annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax deferral can help ensure your retirement dollars are working harder for you over a longer period of time.
The strength of the issuing company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Annuity guarantees are backed by the claims-paying ability of the issuing company, so you should consider
the issuer’s financial strength when purchasing an annuity.
What else should you know before you buy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Learn as much as you can about the particular annuity you have in mind. In addition to speaking with
your financial professional, you should carefully read the product’s supporting sales material, and, if applicable,
the variable annuity prospectus and fund prospectuses.
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The terminology and language of annuities.
15
* “Invest with Guarantees” is a registered service mark of The Prudential Insurance Company of America and its affiliates.
3/ 16
What is an annuity?
An annuity is a contract between you and an insurance company that guarantees to pay you a stream of income at some future
date. You determine whether your payments will be of a specific amount or for a certain period of time – or for the rest of your life.
•• Annuities are appropriate for long-term saving and are designed for retirement purposes. They are generally not suitable for
shorter-term financial goals.
•• You can own an annuity in your own name or jointly with your spouse or another person. The owner designates an annuitant,
the person whose life determines the amount of annuity income payments to be paid under the annuity contract. Typically,
the owner and annuitant are one and the same.
•• You can purchase an annuity contract by making either a single payment or a series of payments. Often there are no
contribution limits with an annuity; in such cases you can add as much money as often as you want within the guidelines
of the product you’ve chosen.*
•• All the guarantees of an annuity are backed by the claims-paying ability of the issuing insurance company.
*For qualified annuity contracts, certain limitations may apply.
4/ 16
Different types of annuities for different needs
You can choose from several different types of annuities to help meet your individual needs and objectives. Your financial
professional can help you determine which type of annuity may be right for you. Annuities can be categorized in two
different ways. First, an annuity may be either immediate or deferred. Second, an annuity may be either fixed or variable.
Immediate Annuities allow you to start taking income sooner
rather than later. This type of annuity is purchased with a
single lump-sum payment and you must begin receiving
income payments within 12 months. You choose the payout
period and the payments are calculated based on the option
that you choose. Your financial professional can assist you in
choosing among the options to help you receive the monthly
annuity income payments you want.
Deferred Annuities allow you to accumulate money on a
tax-deferred basis and, depending upon your age and if the
money is qualified or non-qualified, they may allow you to
delay receiving payments until you’re ready to start taking
income for retirement. You can withdraw income as needed,
or you can set up a regular stream of annuity income
payments that can last for life or over a given time period.
You can purchase a deferred annuity by making either a
single payment or a series of payments.
Fixed Annuities may be an appropriate way to save for
retirement if you’re not all that comfortable taking investment
risks. Fixed annuities guarantee a specified rate of return
(less any surrender charge, if applicable) for a specified period
of time or for life. Depending on the terms of the contract, the
issuing insurance company may adjust the rate periodically.
Some annuities also offer a Market Value Adjustment option.
In general, fixed annuities have lower fees than variable
annuities and are considered less volatile.
An equity-indexed annuity is a fixed annuity, either immediate
or deferred, that earns interest or provides benefits that are
linked to an external equity reference or an equity index.
The value of the index might be tied to a stock or other equity
index. The value of any index varies from day to day and
is not predictable. Equity-indexed annuities credit interest
using a formula based on changes in the index to which the
annuity is linked. The guaranteed account value of a market
value adjusted annuity and an equity-indexed annuity applies
only if the annuity is held until the end of the guaranteed or
contract term and loss of principal is possible if the annuity is
surrendered before the end of the specified period.
Variable Annuities are designed for people willing to take more
risk with their money in exchange for greater growth potential.
A variable annuity is a hybrid of an investment product and an
insurance product. The investment aspect of a variable
annuity is derived primarily from the fact that variable
annuities invest in subaccounts. These subaccounts make
their shares available only to variable insurance products (and
in certain cases, qualified retirement plans) and usually
fluctuate in value each business day.
The insurance element of a variable annuity refers to the
features of the annuity that are typical of the kinds of benefits
offered by life insurance companies. These include the payment
of a death benefit and providing the annuity owner with the
contractual right to annuitize the accumulated value under
the annuity. In addition to those basic insurance features,
many variable annuities today offer optional features called
living benefits that are consistent with the kinds of benefits
offered by life insurance companies. For example, for an
additional fee, some insurance companies offer a “guaranteed
minimum withdrawal benefit (GMWB),” under which the insurer
guarantees that the variable annuity owner can withdraw a
specified dollar amount from the annuity despite declines in
the actual market value of the annuity. In general, you incur a
fee for any insurance benefit under the variable annuity. Thus,
before you buy the annuity, you should decide whether the
benefit (or benefits) you are considering are worth the cost.
Please see pages 10 and 11 for descriptions of certain optional
benefits offered with variable annuities.
Some insurance companies offer variable annuity contracts
with a purchase credit feature. These contracts promise to add
a purchase credit value to your annuity based on a specified
percentage of the initial purchase payments. Variable contracts
with purchase credits may have higher fees and expenses and
a longer surrender charge period than other similar annuities
without a purchase credit. The purchase credit may only apply
to your initial payment or to payments that you make in the
first year of the contract. You may also lose the purchase
credit under some circumstances such as if you make a
withdrawal, free-look the contract or a death occurs within a
specified time. Over time, the higher expenses could be more
than the value of the credits. Carefully consider the expenses
along with the features to be sure this type of annuity meets
your financial needs.
The preceding is a very general description of annuities.
Before buying an annuity, it is important to find out more
about the specific features, terms and costs of the annuity
you are considering. For more information, please refer to
the annuity’s supporting sales material, and if it is a variable
annuity, the product prospectus. The prospectus contains
important information about the annuity contract such as
investment options, fees and charges, living benefit options,
death benefits and payout options.
5/ 16
How annuities work
Annuities have two phases: the accumulation phase and the distribution phase. The accumulation phase starts as soon as you
make your initial purchase payment. The distribution phase begins as soon as you, or you and your spouse, start receiving
income payments, usually at retirement. Upon the annuity owner’s death, the surviving spouse, if he or she is the sole
beneficiary, may be able to continue the annuity contract.
The Accumulation PhasE
The Distribution Phase
During the accumulation phase:
When you’re ready to start taking income, an annuity offers
a choice of distribution options to help you meet your
individual needs and retirement objectives. You can
withdraw your money all at once (subject to surrender
charges) or at periodic intervals. Or, through annuitization,
you can exchange the accumulated value of your annuity for
one of several payout options that guarantee your money will
last as long as you need it, which can be used for retirement
income you can’t outlive. You should consider your options
carefully, because your decision to annuitize is irrevocable
and your payout option generally cannot be changed in the
future.
•• A fixed annuity will earn a specified interest rate and
generate a guaranteed stream of income at some
future date.
•• A variable annuity guarantees future income, but your
account value will fluctuate due to the performance of
the subaccounts you select.
Taxes on any earnings from your annuity will be deferred until
you begin to withdraw funds, so your savings have the potential
to grow faster than a currently taxable investment earning a
similar return.
Annuities typically allow you to take a partial withdrawal of up
to 10% of purchase payments each year without surrender
charges if you need to access your money during the
accumulation phase. But you may be charged a surrender
charge if you withdraw more than the 10% penalty-free amount
during the surrender charge period. If you cancel your annuity
during the early years of the contract or withdraw more than
your permitted amount, there will usually be a surrender
charge. A surrender charge is a fee you will pay if you cancel
your annuity contract, or withdraw more than your permitted
amount, within a specified surrender period. A surrender
charge period is typically zero to 10 years, but can be longer.
The surrender charge is a descending fee that generally is
reduced by one percent each year for a specified period of
time. The surrender charge can be based on the annuity’s
issue date or effective date of purchase and is also referred to
as a Contingent Deferred Sales Charge (CDSC).
Most annuities feature a guaranteed death benefit. If you
should die during the accumulation phase, the issuing
company will return the amount of your original purchase, less
any withdrawals you’ve made, to your beneficiary, even if your
annuity may have declined in value. This death benefit passes
outside of probate, although estate and income taxes may
apply. Many annuities also offer optional death benefits that
can provide an enhanced legacy for your beneficiaries for an
additional cost.
6/ 16
You can choose to receive income payments that will
continue for the remainder of your life. Income ceases upon
your death. A joint-life option guarantees income payments
for the lifetime of two annuitants (for example, a husband
and wife). Or you can receive income for a specific time
period, such as 5, 10 or 20 years. The amount of each
payment will depend on your contract value and the time
period you choose.
How much does an annuity cost?
There are several possible fees and expenses associated with owning an annuity. These charges
are designed to cover costs of selling, administering and providing benefits under the contract.
The product prospectus that you’ll receive before you make a variable annuity purchase decision itemizes
each annuity cost, so you can clearly see how much you’ll be paying for all the benefits and guarantees.
For fixed annuities, the annuity’s supporting sales materials should include these costs. When the issuing company sets
the interest rate to be credited to a fixed annuity contract, it usually considers not only the prevailing market rates, but
also the costs of issuing and maintaining the annuity contract. Generally, fixed annuity expenses cover sales commissions,
statements and customer service.
The most common annuity fees and expenses include the following:
Annual maintenance fee – This is charged as a flat fee and/or as a percentage of your account value. Some
insurance companies waive this fee on larger account values.
Mortality and Expense (M&E) risk charge – This charge, which is a percentage of the daily net assets of the
subaccounts of your variable annuity, compensates the insurance company for providing insurance benefits under the
annuity contract.
Administrative fees – For a variable annuity, this fee is charged as a percentage of the daily net assets of your
subaccounts and is charged in part to cover administrative costs associated with providing the annuity benefits.
These include preparation of the contract and prospectus, confirmation statements, annual account statements and
annual reports, and legal and accounting fees as well as various other related expenses.
Underlying fund expenses – These are fees and expenses associated with a variable annuity’s subaccounts. Each
subaccount incurs total annual operating expenses comprised of an investment management fee, any distribution and
service (12b-1) fees, and other expenses that may apply.
Surrender charges – If you withdraw money from a fixed or variable annuity within a specified period after a purchase
payment or issue date, the insurance company usually will assess a surrender charge, which generally is a percentage
of the purchase payment being withdrawn that declines gradually over a period of several years. Some contracts may
allow you to withdraw part of your account value each year – 10% of purchase payments, for example – without paying
a surrender charge. The applicability of surrender charges depends on the type of annuity you choose. Some companies
may refer to this as the contingent deferred sales charge (CDSC).
Other fees and charges – Certain guarantees offered by some variable annuities, such as an optional living benefit or
an optional death benefit, usually have additional fees and expenses.
These charges will reduce the annuity’s account value. You should ask your financial professional to explain all charges
that apply to the annuity and any optional features you’re considering so that you can understand the costs.
7/ 16
When you are ready to take income
Lifetime Income and Annuitization
You can also choose to receive lifetime income with a minimum number of annuity income payments guaranteed. This option
will guarantee annuity income payments for your lifetime. If you die before the minimum number of income payments have
been paid, your beneficiary will receive income payments for the remainder of the guaranteed period.
You may also have a choice of fixed or variable annuitization. With fixed annuitization, the income amount is traditionally a
set dollar value. Some contracts build in the potential for periodic increases to account for cost of living increases. With
variable annuitization, you can choose to receive variable income, which fluctuates depending on the performance of your
subaccounts, or some combination of fixed and variable income, which offers both stability and the potential for growth.
Living Benefits
Some annuities let you lock in a guaranteed amount for each income payment. The number of payments you receive is based
on several factors including your contract value and the income payment option you choose. There’s another payout option
available on certain variable annuities that offers even greater flexibility. If you want guaranteed lifetime income, but don’t
want to give up control of your assets by annuitizing your contract, ask your financial professional whether adding a living
benefit to your variable annuity, for an additional cost, is appropriate for your needs.
You have choices when you’re
ready to take income from
your annuity.
FPO
Photo
8/ 16
Invest with Guarantees® with variable annuities
The increasing popularity of variable annuities is largely due to new, innovative optional features called living benefits that allow
you to invest with guarantees and insure your retirement income.
Conventional wisdom says that long-term investing in equities should give you the best chance of achieving your retirement goals.
But a critical challenge for many people today is to stay on track with their investment strategies during periods of market volatility.
This is especially true if you’re in The Retirement Red Zone®* – the critical planning years when you look to turn your savings into
income that can last a lifetime – because there may not be enough time to recover from poor earnings performance. Some people
in this situation may be prone to making investment decisions that can have unfortunate results over the long term.
In addition to basic insurance features (such as the payout of a death benefit and the contractual right to annuitize), many variable
annuities today offer optional living benefits. For example, for an additional fee, some insurance companies can offer a guarantee
that captures increases in your annuity during a well-performing market, and protects it against losses during market downturns.
The guaranteed lifetime income of an optional living benefit like this is based on a protected withdrawal value and not the annuity’s
account value. The Protected Withdrawal Value is the value that is locked in and protected from market downturns. You cannot
access the Protected Withdrawal Value outside of the benefit and you cannot withdraw it as a lump sum.
The annuity account value is the value of your variable annuity’s underlying subaccounts. The account value fluctuates daily due to
market changes. Depending upon your annuity’s restrictions, you may be able to withdraw your account value as a lump sum.
Certain other limitations may apply. See the product prospectus for more details.
In general, you incur an additional fee for any optional benefit under the variable annuity. Thus, before you buy the annuity, you
should decide whether the benefit (or benefits) you are considering is worth the cost.
WHAT IT TAKES TO RECOVER FROM A MARKET DOWNTURN
$350,000
How long and how much
would it take to recover?
10%
$300,000
-19%
# Years
VALUE
12%
$250,000
-15%
1
45%
2
21%
3
13%
410%
5
$200,000
$150,000
Average
annual return
8%
Intended
54 3 2 1
Retirement Countdown (Years)
Retirement
What would it take to recover from a market downturn as you get close to retirement? This chart shows that if your investment portfolio suffered two years
of negative performance (-19% and -15%, respectively) during the five years immediately prior to retiring, it would take a very unlikely 45% return in the
following year to fully recover your principal and investment gains.
This chart is hypothetical and one example of the returns an investor theoretically could experience during a given period, and is not intended to depict past
or future performance of a variable annuity or subaccount within a variable annuity. If this were an actual example, various costs would be factored into the
gross return, including annual insurance and administrative charges of the annuity, annual contract charges, investment management fees of the variable
subaccounts, the cost for any optional features, and any other applicable fees.
* “The Retirement Red Zone” is a registered service mark of The Prudential Insurance Company of America and its affiliates.
9/ 16
Types of optional guaranteed living benefits (GLBs)
Variable annuities may offer you the opportunity, at an additional cost, to add an optional Guaranteed Living Benefit (GLB)
to your contract. Since the GLB is optional, you are able to select and pay only for the benefit you need. The GLB you select will
determine the amount of the charges for the benefit and how the charges are deducted from your contract. For example, a GLB
may assess the charge for the benefit against the greater of the account value and the protected withdrawal value (which may
be adjusted for withdrawals and purchase payments). Because of the different ways the charge will be assessed, it is important
that you speak with your financial professional in addition to reading the variable annuity prospectus concerning the specific
GLBs you may be considering.
Guaranteed Flexible Living Benefit
Offers upside market opportunity with downside protection for you and/or your spouse’s retirement income. May
provide compounded growth on the variable annuity’s highest account value at specific intervals, such as on an
annual, quarterly or even daily basis. Also guarantees a minimum level of income payments for life.
Guaranteed Minimum Account Balance (GMAB)
This benefit guarantees that your account value will be equal to some percentage (typically 100%) of purchase
payments less withdrawals, at a specified future date (i.e., maturity).
Guaranteed Minimum Income Benefit (GMIB)
This benefit allows you to receive lifetime income based on a guaranteed amount and annuity rates specified within
the benefit, at or after the specified waiting period. You must choose to annuitize after the benefit waiting period in
order to utilize the benefit.
Guaranteed Minimum Withdrawal Benefit (GMWB Non-Lifetime)
Guarantees that you can make withdrawals, subject to a specified maximum per year (any excess above the withdrawal
amount under the benefit will reduce the protected annual withdrawal amount), which will equal at least a certain
minimum regardless of market performance. You are not entitled to Lifetime Withdrawals under this benefit.
Guaranteed Lifetime Withdrawal Benefit (GMWB Lifetime)
Guarantees that you can make withdrawals, subject to a specified maximum per year, that will equal at least a certain
minimum (e.g., premiums paid less withdrawals) or for life. Typically this benefit has no waiting period.
Note: Withdrawals in excess of applicable maximum withdrawal amount may reduce the remaining benefit base and the maximum annual withdrawal amount
proportionally. In some cases, excess withdrawals may cause you to lose the benefit. You should refer to the prospectus for additional information on the
effect of withdrawals.
10/ 16
Death benefits
Most annuities offer a basic death benefit for your beneficiaries. This way, if you were to pass away before you annuitize,
your loved ones are guaranteed to receive a specified amount – typically at least the total amount of purchase payments,
less an adjustment for any withdrawals.
Basic Annuity Death Benefit
The basic death benefit under a variable annuity is typically equal to the greater of:
•  The sum of all purchase payments (not including any purchase credits) less the sum of all proportional withdrawals
(or some annuities offer a dollar-for-dollar reduction).
•  The sum of the account value in the subaccounts and the fixed rate options (less the amount of any purchase credits
applied within 12 months prior to the date of death). Please note that purchase credits are not recaptured in all states
and different companies have different recapture policies.
The basic death benefit under a fixed annuity typically is:
•  Equal to 100% of the contract’s account value – less any withdrawals and surrender charges.
Many variable annuities also offer optional enhanced death benefits, for an additional fee, that can help protect your legacy from
market downturns. They provide additional guarantees for the death benefit amount paid to beneficiaries.
Please note that withdrawals can reduce the living benefit, death benefit and account values.
Because there are so many different living and death benefit options available today, all backed by the claims-paying ability of
the issuing company, it’s important that you work closely with your financial professional to see which ones may be right for you.
Note: These descriptions are not intended to capture all the terms, conditions and limitations found in the most common types
of living and death benefits. Some or all of these benefits may or may not be available with the new annuity you are considering.
Complete information is contained in the product’s supporting sales materials or product prospectus. You should read the
appropriate documents carefully before electing an optional benefit.
Medically related surrenders
Surrenders may be available without a surrender charge if the annuitant becomes terminally ill or is confined to a medical care
facility for over 90 days. Medically related surrenders are available where permitted by law and are subject to the provisions in
the annuity.
11/ 16
Tax advantages of an annuity
One of the major advantages of an annuity is tax-deferred growth potential. You pay no taxes on your earnings until
you take withdrawals.
Tax deferral is an important aspect of an annuity, since more money stays invested that otherwise would have been paid out
in taxes. Over time, any investment gains will be able to compound, potentially generating earnings from previous earnings.
And the longer you hold onto your annuity, the greater the impact tax deferral can have on your assets.
The chart (below) illustrates just how effective tax deferral can be. A hypothetical $100,000 investment compounded at
8% annually over 30 years grows to $1,006,266 with taxes deferred. Once taxes are paid on the lump-sum distribution,
the amount received is $707,198, which is still much more than the $478,931 earned on a taxable investment over the
same time frame.
THE POWER OF TAX DEFERRAL
$1,006,266
Tax-Deferred
Investment
$1,000
DOLLARS (000’s)
$800
$707,198
$600
$478,931
Taxable
Investment
$400
$200
Years
1
5
10
15
20
25
30
Assumes hypothetical $100,000 invested year one at 8%, 33% ordinary income tax assessed yearly on taxable investments and at period end on tax-deferred
investments. Actual tax rates may vary for different assets and taxpayers (e.g., capital gains and qualified dividend income) from that illustrated. Actual
performance of your investment will also vary. Hypothetical returns are not guaranteed and do not represent performance of any particular investment.
Hypothetical returns do not include withdrawal charges, mortality and expense risk charges, administrative fees, or other contract charges, which would
reduce performance if they were included. If a withdrawal or distribution is taken before age 59½, a 10% federal tax penalty may apply. This is a hypothetical
example for illustrative purposes only. It does not reflect a specific annuity, an actual account value or the performance of any investment.
Tax-deferred variable annuities allow you to transfer your money from one subaccount to another within the annuity without
paying taxes on your income and gains. That’s not the case with taxable investments, where moving your money from one
investment to another is treated as a sale and any gains are taxed at that time.
Tax-free transfers make it easier and more convenient to revise your investment strategy as needed without worrying about
losing some of your earnings to taxes and without having to surrender your contract. Some transfer limits, however, may apply.
12/ 16
There are other tax issues to consider before you purchase an annuity:
•  Annuitized payments are considered part taxable income and part return on investment.
•  Distributions are generally taxed as ordinary income and do not get the benefit of the lower tax rates received by certain
capital gains and dividends under current tax laws.
•  Lump-sum withdrawals are subject to the largest tax liability, whereas a systematic withdrawal program lets the rest
of your annuity’s value continue to grow tax-deferred.
•  Withdrawals and distributions of taxable amounts, if made prior to age 59½, may be subject to an additional 10%
federal income tax penalty in addition to your normal income tax.
•  For tax purposes, withdrawals are deemed to be investment gains out first followed by a return of principal.
Also, the death of an annuity owner – and, in some cases, the death of an annuitant – may result in taxable distributions
that must be made from the contract within a specified period of time. Upon the death of the owner or annuitant:
•  Gains may be taxable to the beneficiary.
•  Annuity assets may be included in the owner’s estate for tax purposes.
•  Annuity assets may avoid the delays of probate, unless the annuity owner’s estate is the named beneficiary or no
beneficiary is named.
Qualified and non-qualified funding of annuities
You can also acquire an annuity as part of an IRA, 401(k) or other tax-advantaged plan, which allows you to save on a pre-tax
basis. However, keep in mind that an annuity provides no additional tax benefit if the contract is held in a tax-qualified plan.
So you should consider an annuity for an IRA, 401(k), etc., only on the basis of its other benefits, such as lifetime income
payments and guaranteed living and death benefit options.
When an annuity is purchased with pre-tax money, such as an IRA rollover, 401(k) or 403(b), it’s known as a qualified
annuity. Qualified money already has tax-deferred status; when invested into an annuity, it can be used to create a
guaranteed stream of income payments, provide a death benefit, and provide other optional features available in an annuity.
Certain qualified retirement plans permit a deduction for the amount contributed to the plan. Generally, the contributions
cannot exceed a maximum percent of taxable income, or a dollar amount, whichever is less.
When an annuity is purchased with after-tax money, such as an inheritance, a bonus or non-qualified deferred compensation,
it’s known as a non-qualified annuity. Both grow tax deferred. However, if the annuity has a qualified tax status, the
IRS requires that you begin taking minimum distribution withdrawals at age 70½. For annuities held in a Roth IRA, there
are no required minimum distributions (RMDs) during the owner’s lifetime.
13/ 16
The strength of the issuing company
An important consideration when buying an annuity is the stability and financial strength of the issuing company. You need to
know whether the company is going to be there when you need it.
Annuity guarantees are backed solely by the claims-paying ability of the issuing company. So you’ll want some assurance that
the company providing the guarantees is strong and stable and that the company will likely be around when you need it.
Several independent ratings agencies evaluate the financial strength of insurance companies. The rating for an individual
company is an opinion as to its financial strength and ability to pay claims (including guaranteed benefits) in the future.
Before you make your purchasing decision, be sure to ask your financial professional about the reputation and financial
strength of the company behind the guarantees. What kind of experience does the company have issuing annuity products
and meeting its financial obligations? What’s the company’s track record for delivering customer satisfaction?
Please note that while all guarantees are based on the financial strength of the issuing company, if you purchase a variable
annuity, there is no guarantee on investment performance of the underlying variable subaccounts.
What else should you know before you buy?
Be an informed consumer. Learn as much as you can about the specific annuity you’re considering and compare its benefits and
costs to those of other retirement products.
If you are considering an annuity, your financial professional will provide you with a prospectus and other supporting sales
materials. It’s important to review these materials as they contain important information about the annuity’s risks, fees and
expenses, as well as the payout options, availability of living and death benefits and more.
Be sure you can answer the following questions satisfactorily before you purchase an annuity:
•  Are you taking full advantage of all your other tax-deferred opportunities, such as 401(k)s, 403(b)s and IRAs?
•  Will you use the annuity to save for retirement or a similar long-term goal?
•  What is your investment objective, risk tolerance, and investment time horizon?
•  Will the annuity help address your retirement income needs?
•  Are you investing in the annuity through a retirement plan or IRA?
•  Are there features and benefits in the annuity contract, other than tax deferral, that make an annuity
purchase appropriate?
•  Do you understand the features of the annuity?
•  Do you understand all of the annuity’s fees and expenses?
•  Do you intend to keep your money in the annuity long enough to avoid paying any surrender charges if you
have to withdraw money?
•  Have you consulted a tax advisor and considered all the tax consequences of purchasing an annuity, including
the effect of annuity payments on your tax status or the effect of death benefit payments to your beneficiaries?
14/ 16
Glossary
Annuities use terminology with which you may not be familiar. To help you understand the language of annuities, words
appearing in bold throughout this guide are explained here.
Annuitant – The person, usually the contract owner, entitled
to receive annuity benefits. The annuitant’s life expectancy
is used to calculate the annuity’s income payment amount.
Annuitization – The act of “annuitizing” – that is,
surrendering an annuity’s accumulated value in exchange for
guaranteed income payments, either for life or for a
specified number of years. Annuitization contractually ends
an annuity’s accumulation phase.
Death benefit – The amount paid to a beneficiary upon the
death of the annuitant or contract owner, as determined
by the applicable annuity contract. Typically, there’s a basic
death benefit included in the annuity contract, as well as a
choice of enhanced death benefits that you can elect for an
additional fee.
Effective date of purchase – The date funds are credited to
the annuity contract.
Free-look period – A specified number of days (e.g., 10)
during which an annuity contract holder may rescind the
contract purchase.
Investment objective – How you seek to have your
investments achieve your anticipated investment goals.
Investment risk – The potential to lose money by investing
in stocks, bonds and other securities. In general, the higher
the potential return, the higher the level of risk involved.
Investment time horizon – The period of time an investor
expects to be able to grow an investment before needing
the invested money. The length of time may influence the
investment objective, risk tolerance and the investment
strategy.
Issue date – The date an annuity contract becomes
effective.
Living benefit – An optional feature, available at an additional
cost, that provides specific income, withdrawal and/or
accumulation guarantees, which further protect individuals
against downside investment risk.
Market value adjustment (MVA) – This feature, which is
included in some annuity contracts, imposes a positive or
negative adjustment if you prematurely surrender your fixed
annuity or the fixed subaccount of your variable annuity.
Prospectus – A legal document filed with the Securities and
Exchange Commission that provides detailed information
about a variable annuity contract and its investment options.
Purchase credit – A credit added to your variable annuity
contract value based on a specified percentage (usually
2% to 6%) of the initial purchase payment. A variable
annuity with a purchase credit feature usually has higher
fees and expenses, as well as a higher and longer surrender
charge period.
Purchase payment – The amount of money paid to the
annuity issuer in exchange for the rights, privileges and
benefits outlined in the annuity.
Risk tolerance – Your comfort level with regard to the risk of
fluctuations in the value of your investment.
Subaccounts – The portfolios in which purchase payments
and any gains on those purchase payments are invested.
You choose which subaccounts you want your money
invested in and how much you want to allocate to each.
Supporting sales material – Literature created by the
insurance company that provides information about the
annuity and its features.
Surrender charge or Contingent Deferred Sales Charge (CDSC)
The cost to a contract owner for early redemption of the
contract or withdrawing money before the end of the
surrender charge period. This charge typically is represented
as a percentage and decreases to zero over time.
Surrender charge period – A time period that is specified in
the contract and is usually the first 10 years from either the
issue date or the effective date of purchase, but can be
longer or shorter.
15/ 16
Investors should consider the features of the contract and the underlying portfolios’ investment objectives, policies, management, risks, charges
and expenses carefully before investing. This and other important information is contained in the prospectus, which can be obtained from your
financial professional. Please read the prospectus carefully before investing.
Issuing companies are located in Newark, NJ. Variable annuities are distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential
Financial companies and each is solely responsible for its own financial condition and contractual obligations. Prudential Annuities is a business of Prudential
Financial, Inc.
This material was prepared to support the marketing of fixed and variable annuities. Prudential, its affiliates, its distributors and their respective representatives
do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended to be used for the purpose of avoiding U.S. federal, state
or local tax penalties. Please consult your own advisor as to any tax or legal statements made herein.
A variable annuity is a long-term investment designed for retirement purposes. Investment returns and the principal value of an investment will fluctuate so that
an investor’s units, when redeemed, may be worth more or less than the original investment. Withdrawals or surrenders may be subject to contingent deferred
sales charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to an additional
10% federal income tax penalty. Withdrawals, other than from IRAs or employer retirement plans, are deemed to be gains out first for tax purposes. Withdrawals
reduce the account value and the living and death benefits.
Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you
with costs and complete details.
Your needs and suitability of annuity products and benefits should be carefully considered before investing.
The benefit payment obligations arising under the annuity contract guarantees, rider guarantees, or optional benefits and any fixed account crediting rates or
annuity payout rates are backed by the claims-paying ability of the issuing insurance company. Those payments and the responsibility to make them are not the
obligations of the third party broker/dealer from which this annuity is purchased or any of its affiliates. They are also not obligations of any affiliates of the issuing
insurance company. None of them guarantees the claims-paying ability of the issuing insurance company. All guarantees, including optional benefits, do not apply
to the underlying investment options.
Optional benefits have certain investment, holding period, liquidity and withdrawal limitations and restrictions. Optional living and death benefits may not be
available in every state and may not be elected in conjunction with certain optional benefits. The fees are in addition to fees and charges associated with the
basic annuity.
© 2012. Prudential Annuities, Prudential, the Prudential logo, the Rock symbol, Bring Your Challenges and The Retirement Red Zone are service marks of
Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
one corporate drive
shelton, connecticut 06484
0160994-00006-00 ORD203224 Ed. 11/2012
[WO# 503301]