How to Read an Annuity Statement & What to Look For

An annuity statement details an individual’s contract, showing its current status, financial activity, and performance. Understanding this document is important for annuity holders, as it allows them to track their investment, verify transactions, and align financial plans with expectations. Statements offer a comprehensive overview, helping individuals monitor the growth of deferred earnings, which accumulate tax-deferred until distributions begin. Regularly reviewing the statement confirms recorded information, from contributions to withdrawals, is accurate. It also helps identify discrepancies or changes, ensuring the annuity serves its purpose within a broader financial strategy.

Navigating the Statement’s Layout

Annuity statements are organized for clarity, often starting with a summary page. This page provides a snapshot of the annuity’s overall value and recent activity, including key figures like current and previous account values. Following the summary, sections detail the contract’s specifics, such as the annuity type, issue date, and elected features or riders.

Further into the statement, sections cover investment performance, especially for variable annuities. These illustrate how underlying investment options have performed over various periods, such as year-to-date or since inception. Transaction history sections list all financial movements chronologically, including contributions, withdrawals, and fee deductions.

Statements also include personal and policy information, confirming the policyholder’s contact details and contract specifics. Contact information for customer service or the annuity provider’s administrative office is typically found on the statement, often on the first or last page, allowing policyholders to easily reach out for assistance.

Understanding Account Values and Performance

An annuity statement provides several financial figures illustrating the contract’s value and investment performance. The “Accumulated Value” or “Account Value” represents the total annuity value before any surrender charges or other deductions. This figure reflects premiums paid, credited interest or investment gains, less withdrawals and fees, representing a gross valuation of the annuity’s worth at the statement date.

The “Cash Surrender Value” is the actual amount an annuity holder would receive if surrendering the contract. This value is the accumulated value minus any applicable surrender charges.

The “Death Benefit” specifies the amount paid to beneficiaries upon the annuity holder’s death. This amount varies by contract terms, potentially equaling the accumulated value, total premiums paid, or a stepped-up value. For variable annuities, the statement details “Investment Performance” for each sub-account, showing returns for various periods.

For fixed and indexed annuities, the statement indicates “Crediting Rates.” A fixed annuity shows a guaranteed interest rate, while an indexed annuity details interest calculation based on an external market index, often with participation rates or caps. These rates determine how the annuity’s value grows.

Reviewing Transactions and Fees

Annuity statements record all financial movements, allowing holders to verify transactions and understand associated costs. The “Contributions” or “Premiums” section lists all payments made into the annuity, whether lump sums or scheduled contributions. Cross-reference these entries with personal records to ensure deposits are accurately reflected, as these payments form the annuity’s principal. Missing or incorrect entries could affect the overall value and future distributions.

The “Withdrawals” or “Distributions” section itemizes amounts taken out, including regular income payments, partial withdrawals, or full surrenders. Each entry shows the date, amount, and sometimes the reason. Annuity distributions are taxed as ordinary income to the extent they represent earnings.

Statements also detail various fees and charges that reduce the annuity’s value. “Rider Costs” are charges for optional benefits like guaranteed income or enhanced death benefits. These costs are a percentage of the account value, deducted periodically. “Administrative Fees” cover contract management, usually a flat annual fee or a small percentage of the account value.

For variable annuities, “Mortality & Expense (M&E) Charges” compensate the insurer for death benefit and other contractual guarantees. These are an annual percentage of the account value. “Surrender Charges” are fees incurred if the contract is terminated or significant withdrawals are made before a specified period, typically ranging from 5% to 10% in the early years and declining to zero over time.

Verifying Policy and Personal Information

Beyond financial details, an annuity statement contains administrative information to verify for accuracy. The “Policyholder Information” section includes the annuity owner’s name, mailing address, and contact details. Review this information to ensure it is current, as official communications and tax documents are sent to the address on file. Outdated information could lead to missed communications or other delays.

The statement displays the “Policy Number” and “Type of Annuity” (e.g., fixed, variable, indexed, immediate, deferred). Confirming the policy number ensures the statement pertains to the correct contract. The issue date is also listed, which helps track time-sensitive contract features.

“Beneficiary Designations” lists the individuals or entities receiving the annuity’s death benefit upon the policyholder’s passing. Review this information to ensure intended beneficiaries are accurately named with correct percentages. Errors in beneficiary designations can lead to complications and unintended asset distribution, potentially resulting in probate delays.