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. Withdrawals in excess of the Annual Income Amount impact the value of your benefit and can also affect the certainty of your income. An excess withdrawal occurs when your cumulative Lifetime Withdrawals exceed your Annual Income Amount in any annuity year. If an excess withdrawal is taken, only the portion of the Lifetime Withdrawal that exceeds the remaining Annual Income Amount will proportionally and permanently reduce your Protected Withdrawal Value and your Annual Income Amount for future years. If an excess withdrawal reduces the account value to zero, no further amount would be payable and the contract terminates. The Account Value is separate from the Protected Withdrawal Value and is not guaranteed. The account value is not guaranteed, can fluctuate, and may lose value.
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Frequently Asked Questions:
What is a variable annuity?
A variable annuity is a contract with an insurance company. It's a long-term investment designed for retirement purposes. You invest money in professionally managed investment portfolios, where it accumulates tax-deferred. 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. When you retire, your investment can be used to generate a stream of regular income payments that are guaranteed for as long as you live. In addition, variable annuities may provide a guaranteed death benefit for your beneficiaries. It is important to remember that annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force.
Why does the company behind the annuity matter?
When the time comes for you to use the benefits that are offered by a variable annuity it is important to remember that all guarantees including the optional benefits are backed by the claims-paying ability of the issuing insurance company and do not apply to the underlying investment options.
Who can help me determine if an annuity is right for me?
A Financial Representative can help you determine if a variable annuity is suitable for you. Prudential Annuities and its distributors and representatives do not provide tax, accounting, or legal advice. Please consult your own attorney or accountant when making important investment decisions. Prudential Annuities does not provide investment advice. The selections you choose are all dependent on your investment goals and your risk tolerance.
What happens if I need access to my money?
There are limitations and restrictions when making withdrawals. 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, sometimes referred to as an additional income tax. Withdrawals reduce the account value and the living and death benefits proportionately.
The Protected Withdrawal Value is only used to calculate the initial guaranteed lifetime income and the charge for the benefit. It is separate from the account value and is not available as a lump sum withdrawal. The account value is not guaranteed, can fluctuate, and may lose value.
What are the costs associated with purchasing this product?
The Prudential Premier® Retirement Variable Annuity is available at a total annual insurance cost of 0.85%, with additional fees related to the professionally managed investment options. Fees for the optional Highest Daily benefits are in addition to fees and charges associated with the basic annuity and are as follows: Highest Daily Lifetime Income – 1.00%; Spousal Highest Daily Lifetime Income – 1.10%. Additional fees such as withdrawal fees, transfer fees and administrative fees may also apply. Please see the prospectus for more information.
What are the limitations and restrictions I need to consider?
Highest Daily benefits have certain investment, holding period, liquidity, and withdrawal limitations and restrictions. Optional benefits may not be available in every state. See the prospectus for more information.
What are some of the other considerations that I need to think about when investing in various asset allocation portfolios offered by a variable annuity?
When purchasing an annuity, it is important to remember that asset allocation does not ensure a profit or protect against a loss. 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. The value or price of a particular stock or other equity or equity-related security owned by a portfolio could go down and you could lose money. Additionally, fixed income investments are subject to risk, including credit and interest rate risk. Because of these risks, subaccount's share value may fluctuate. If interest rates rise, bond prices usually decline. If interest rates decline, bond prices usually increase. Certain asset allocation portfolios may use leverage, short sales, and derivatives or engage in other speculative practices within their alternative investments. These practices include a high degree of risk and may increase the risk, size, and velocity of investment losses. Although certain alternative strategies seek to reduce risk by attempting to reduce correlation with equity and bond markets, no guarantee can be given that such efforts will be successful. The fees and expenses associated with alternative investments are generally higher than those for traditional investments. Lastly, diversification does not assure against loss in a declining market.
How does Prudential manage the guarantees associated with Highest Daily?
It starts with our prudent product design where we manage risks in three important ways. First, we offer a broad selection of asset allocation portfolios that helps provide the potential for greater returns and helps us manage investment risk. Second, 10% of all purchase payments is automatically allocated to the Secure Value Account (SVA) - a fixed account that provides an annual guaranteed interest rate. You cannot make transfers into or out of the SVA. The SVA will earn interest daily at a crediting rate declared annually. And third, Highest Daily benefits use a predetermined mathematical formula, that is designed to help mitigate some of the financial risk associated with providing and managing your guarantees during all market cycles.
What is the predetermined mathematical formula?
Highest Daily suite of benefits uses a predetermined mathematical formula to mitigate some of the financial risks we incur in providing the guarantees under the optional benefits through all market cycles. Each business day, the formula determines if any portion of your account value in the permitted subaccounts (asset allocation portfolios), including any Dollar Cost Averaging (DCA) Market Value Adjustment (MVA) options needs to be automatically transferred into or out of the AST Investment Grade Bond Portfolio (the "Bond Portfolio"). Amounts transferred by the formula depend on a number of factors unique to your individual annuity and include: