Accumulation Phase: The period of time during which you are saving for retirement or some other goal. With an annuity, taxes are deferred as long as you don't make withdrawals. You may choose to move from the accumulation to the payout stage by annuitizing.

Anniversary and Issue Dates: The contract is issued on the issue date; usually very soon after the complete application and first payment are received. The issue date is also the effective date. The anniversary date is based on the issue date.

Annuitant: The person(s) on whose life the annuity payments will be based. The individual who owns the contract designates who this person is. Generally, the owner, not the annuitant, receives any income from the annuity. In most cases, the owner and the annuitant are the same person. Generally, in the payout stage, payments to the owner continue as long as the annuitant is alive.

Annuitization: The process of converting an annuity to the payout stage. Once you have annuitized, you will receive regular periodic payments and will no longer be able to surrender the annuity.

Annuity: Traditionally associated with a right to receive periodic payments for life, annuities are now more often used to save for retirement. Key features are tax deferral during accumulation phase and potential of income-for-life during payout stage.

Annuity/Maturity Date: Often age 85 or 90: the date when the annuity is automatically annuitized, if not before. In some cases, the contract holder may change this date.

Asset Allocation: The division of your investment among different asset classes (for instance, between domestic stocks, international stocks, domestic bonds, and cash).

Asset Classes: The three major asset classes include cash and cash equivalents; fixed income, such as bonds and bond funds; and equities, such as stocks and stock funds.

Beneficiary: The person(s) or entity the contract owner names to receive the death benefit, if any, upon the death of the contract owner. If no beneficiary is named, the death benefit goes to the annuitant or the owner's estate.

Contract Owner: The person(s) or legal entity responsible for funding the investment and receiving any income from the annuity, or designating another person to receive the income. This person makes the investment decisions, transfers funds, makes withdrawals, and, when applicable, can surrender the contract.

Death Benefit: If the contract owner dies during the accumulation period, or during the period certain of the payout stage, the beneficiary will generally receive the current value of the account. In some cases, the death benefit is the amount invested in the annuity, if that amount is greater than the current value of the account.

Diversification: The strategy of attempting to reduce risk by investing in a broad range of assets:

• Real estate, stocks, bonds
• Domestic and foreign securities
• Across different industries

Risk is spread so that a major reversal in one asset class, geographic region, or industry only impacts the entire portfolio to a minor degree. Also, losses in one area may be offset by gains in another area.

Fixed Annuitization: The payout stage of a fixed annuity. Payments remain fixed during the term of the payout (as opposed to the payout stage of a variable annuity, during which payments vary based on investment performance).

Fixed Annuity: Offers a guaranteed interest rate for a specified period of time during the accumulation period, or a fixed payment amount, or an amount that varies according to predetermined formula during the entire payout period. The guarantee is based on the claims-paying ability of the issuing company.

Free Look: A brief period, typically 10 to 20 days, after you receive your annuity contract during which you can return the contract for the amount of your initial investment or the current value of your annuity contract. In many cases, your investment is placed in a money market account during the free-look period. Individual state rules vary.

Fund Management Fees (AKA Investment Management Fees): In a variable annuity, you usually have a choice of investment options, ranging from money market funds to funds including stocks and/or bonds. The Fund Management Fee is charged for managing the investment options. This fee will vary widely depending on which investment options are chosen and is in addition to the M&E charge. Within any given annuity, the Total Subaccount Fees are the combined Fund Management Fees.

Guaranteed or Fixed Period: The period of an annuity during which the interest rate or return is set or guaranteed.

Income or Payout Options: You can receive income from your annuity through a lump sum payment, partial withdrawals, systematic equal withdrawals, or annuitization.

Income Phase: The period after you have annuitized during which you receive income based on the annuitization option chosen. Also known as "payout" or "annuitization" phase.

Initial Purchase: This is the payment that opens your account. Usually there is a minimum initial purchase, and then a lower minimum amount for additional investments during the accumulation period.

Investment Management Fees (AKA Fund Management Fees): - In a variable annuity you usually have a choice of investment options, ranging from money market funds to funds including stocks and/or bonds. The Investment Management Fee is charged for managing the investment options. This fee will vary widely depending on which investment options are chosen, and is in addition to the M&E charge. Within any given annuity, the Total Subaccount Fees are the combined Investment Management Fees.

Joint Ownership: Typically but not always husband and wife, the surviving joint owner will receive the ownership benefits of the annuity after the first owner dies.

Life Only: The owner continues to receive payments as long as the annuitant is alive. Once the annuitant dies, payments stop. Payments with the Life Only option are the highest, relative to the other options, because the annuitant could die shortly after annuitizing, in which case the payments would only last a short time.

Life with Period Certain: If you select a payout option with a certain period, your beneficiaries or estate will continue to receive payments until the end of the certain period, even if the annuitant dies before the end of the certain period.

Mortality and Expense Risk Charge (M&E): In variable annuities, there are two major annual fees. One, the M&E, is for the annuity itself; the other is for the expenses and management of the subaccounts.

Payout: Periodic income generated through annuitization. Payout phase is same as annuitization or income phases.

Premium Taxes: There are some states that charge a tax on contributions made to annuities. As of this writing, the applicable states were California , Maine , Nevada , South Dakota , West Virginia , and Wyoming . Generally, the issuing company charges the investor for any premium tax that it pays to the state.

Rebalancing: If you utilize asset allocation, your portfolio will occasionally need to be changed to maintain the desired allocations. Rebalancing is necessary because investment values fluctuate over time.

Single Owner: As the name implies, one individual receives the benefits of ownership. (See "Contract Owner.")

Subaccount: Also known as "funds", the subaccounts are the investment options within a variable annuity. One may have multiple subaccounts within a single annuity. Fixed annuities do not have subaccounts, although some variable annuities have subaccounts offering fixed investment options.

Surrender Value: The amount you would receive if you decided to cancel your contract and withdraw all the money in the annuity. The surrender value is the amount you would receive after deducting for any applicable surrender charges and/or penalties imposed by the federal government for withdrawals prior to age 59 1/2.

Systematic Withdrawal: Rather than annuitizing, you can choose to withdraw a certain percentage of the value or dollar amount of your annuity at regular intervals. Surrender charges and early withdrawal penalties may apply. The major drawback as compared to annuitization is that your account may be exhausted prior to death.

Tax Deferral: Taxes on annuity earnings are postponed until you receive money from your annuity.

Tax-Deferred Compounding: Investment gains that would otherwise have been used to pay annual taxes remain in the account and continue to accrue investment returns. Thus you are paid "interest on your interest" until you withdraw funds.

Tax-Free Transfers: Annuities allow you to move money between investment options without incurring a tax liability.

Total Return: A measure of investment performance that includes gain or loss and assumes reinvestment of dividends and/or interest.

Total Subaccount Fees: If only one investment option is chosen, the Total Subaccount Fees are the same as the Investment Management Fee, also known as the Fund Management Fee. If more than one investment option is chosen within an annuity, the Total Subaccount Fees are equal to the pro-rata Investment Management Fees. In an annuity with a value of $100,000, if $50,000 was invested in a fund with a Fund Management Fee of $500 per year, and the remaining $50,000 had a Fund Management Fee of $750, then Total Subaccount Fees would be $1,250.

Variable Annuitization: Once you annuitize a variable annuity, you will receive periodic payments that vary according to the investment performance of the subaccounts.

Variable Annuity: Life insurance product that provides tax deferral during the accumulation stage and may be annuitized to provide income for life during the payout stage. Variable annuities fluctuate in value depending on the performance of the subaccounts.

Variable Investment Options: Within variable annuities are professionally managed subaccounts that allow customers to pursue different investment strategies and goals. These subaccounts are similar to mutual funds, although they have important differences.

Withdrawals: At any time during the accumulation period, you can withdraw all or part of your money; surrender charges and/or penalties imposed by the federal government for withdrawals prior to age 59 ½ may apply. Generally, you may not make withdrawals during the payout period.

Withdrawal (Surrender) Charges: Some annuities have a surrender charge, which may be applicable for as short a period as one year or as long as seven years. There may be some amount, often 10%, that you may withdraw during this period without incurring any surrender charge

Feel free to contact us for a no obligation, no cost analysis of your investment portfolio. Our clients benefit from our counsel and process of customized service. We are not just selling a single investment or idea. DeSpenza Capital Management, LLC is proposing a serious investment process by which you can manage you money for a lifetime. Please contact us for a free Complimentary Consultation to discuss diversification opportunities for income, savings, and legacy. This intro page gives you a brief synopsis of each investment category of service we offer.

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email: adespenza@despenza.com

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