A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic payments to you, beginning either immediately or at a future date. You purchase a variable annuity contract by making either a single purchase payment or a series of purchase payments.

A variable annuity offers a range of investment options. The value of your investment as a variable annuity owner will vary depending on the performance of the investment options you choose. The investment options for a variable annuity include "subaccounts" that are managed to invest in stocks, bonds, money market instruments, or a combination of the three.

Variable annuities include underlying investment options with risks and potential rewards of the stock and bond markets. However, they differ from mutual funds in several important ways

First, variable annuities let you receive periodic payments for the rest of your life (or the life of your spouse or any other person you designate). This feature offers protection against the possibility that, after you retire, you will outlive your assets.

Second, variable annuities have a death benefit. If you die before the insurer has started making payments to you, your beneficiary is guaranteed to receive a specified amount - typically at least the amount of your purchase payments. Your beneficiary will get a benefit from this feature if, at the time of your death, your account value is less than the guaranteed amount.

Third, variable annuities are tax-deferred. That means you pay no taxes on the income and investment gains from your annuity until you withdraw your money. You may also transfer your money from one investment option to another within a variable annuity without paying tax at the time of the transfer. When you take your money out of a variable annuity, however, you will be taxed on the earnings at ordinary income tax rates rather than lower capital gains rates. And remember that withdrawals before age 59½ may be subject to an additional 10% IRS penalty. In general, the benefits of tax deferral will outweigh the costs of a variable annuity only if you hold it as a long-term investment to meet retirement and other long-range goals.

Variable annuities can be an excellent financial strategy for some investors, but it pays to do your homework and learn everything you can about a particular variable annuity contract before you decide to invest. It is important to realize that there is an annual mortality and expense fee associated with the benefits of owning an annuity. Be sure to read the prospectus for a variable annuity contract carefully before making your final decision to invest and for complete information on fees and costs. Remember that no one can predict the stock or bond markets: past performance is no guarantee of future results. At Associated Investment Services, Inc., we work with a number of well-respected insurance companies to offer a great selection of variable annuity options. And, ask us lots of questions. We're here to help you navigate your many financial options to choose the right ones for you.

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Withdrawals before age 59½ may be subject to an additional 10% IRS penalty.