Income Edge: Tax-Efficient Payment Program
Investment Edge gives the flexibility to access income in multiple ways.
- Income Edge, a payment program available at no additional fee in non-qualified contracts, allows:
- Customize payment period based on personal income needs and time horizon.
- Take payments that are only partially taxed.
- Generally receive higher after-tax income in the early years, compared to equivalent, regular withdrawals, assuming positive account performance.
- Or elect to withdraw using:
- Automatic Required Minimum Distribution service.
- Lump sum distributions.
- Early withdrawals with equal payments that avoid the 10% IRS tax penalty.
- Systematic withdrawals.
Comparing non-qualified deferred annuity contracts:
With typical annuity withdrawal payments, investors receive their earnings back first, which are fully taxed. Once they’ve received all their earnings, they begin to receive tax-free payments back from their cost basis-- their initial contribution, which has already been taxed. That means investors payments are typically subject to higher taxes in the early years while their payments are a return of their earnings.
With Income Edge, each scheduled payment investors receive is a combined return of their earnings and part of their cost basis, allowing them to stretch their taxable payments over many years, instead of paying more tax up-front. This tax-efficient approach allows them to receive generally higher payments sooner, when they may need access to more of their money.
*Pie charts are a conceptual representation, assuming no Account Value growth or volatility and an initial Account Value that is 50% gains
How it works
Income Edge is available for no additional fee and allows investors in non-qualified contracts to elect a customized payment program. When elected, Income Edge is designed to pay out the entire account value via scheduled payments over a set period of time and a portion of each payment is a return of cost basis and thus excludable from taxes.
How payments are determined
This tax-free amount is calculated by dividing the remaining cost basis by the number of years in the payment period selected and will not change once calculated. Once investors begin taking payments, they may not stop or increase their payment although the contract can be fully redeemed for the then current account value net of applicable withdrawal charges. The amount of payments available through the Income Edge program is re-determined on an annual basis, meaning that the amount of the payment may vary each year of the payout period. A combination of adverse investment performance, additional withdrawals and contract fees may reduce the payout period selected.
Additional important information
The Income Edge payment program does not represent a life contingent annuitization of the Investment Edge contract. With a life contingent annuitization the account value is applied to provide periodic payments for life and the Investment Edge contract and all its benefits terminate. After Income Edge election, additional partial withdrawals are fully taxable and in excess of the annual 10% free withdrawal amount will continue to be subject to a withdrawal charge if they are made during the withdrawal charge period. If the contract owner dies after Income Edge is elected, scheduled payments will continue to the beneficiary and any specified form of death benefit payout that they have selected will be invalidated. There are additional restrictions and limitations including age restrictions and the payout period being limited to specific time periods. Please see the prospectus for more information including Investment Edge fees and charges.
With typical annuitization, while investors will receive tax efficient payments, they also lose investment control and access to the contract’s account value. Income Edge provides consistent tax efficiency, while allowing them to stay invested and maintain control and the ability to access the contract’s account value. The Income Edge payment program does not represent a life contingent annuitization of the Investment Edge® contract. With a life contingent annuitization, the account value is applied to provide periodic payments for life and the Investment Edge® contract and all its benefits terminate. The investor should consider that Income Edge does not generate even payments as annuitization does, and because Income Edge provides payments over a fixed period and annuitization provides payments for life, annuitization provides the potential for a higher total amount that could be distributed from the annuity contract. These factors should be considered when making a decision on how to have the annuity contract distributed in a tax-efficient manner.
Income Edge is not a guaranteed income benefit. Payments from Income Edge are based on account value and selected duration.
A combination of adverse investment performance, additional withdrawals and contract fees may reduce the payout period selected. Income values are not guaranteed.
It should be noted that Income Edge is not the only way to take payments that are partially taxed as this may be accomplished through annuitization of the annuity contract. Unlike a life contingent annuitization, Income Edge allows for a form of annuity payments that is designed to pay out the entire value of the contract via scheduled payments over a set period of time and provides continuous access to the contract’s account value.
There are certain contract limitations and restrictions associated with an Investment Edge contract.
Important Note: AXA Equitable has designed this material to serve as an informational and educational resource; it does not offer or constitute investment advice and makes no direct or indirect recommendation regarding the appropriateness of any particular product or investment-related option. Your unique needs, goals and circumstances require and deserve the individualized attention of your financial professional.
“Tax-efficient distributions” refers to options where a portion of the distribution is a return of cost basis and thus excludable from taxes.
What is a variable annuity?
A variable annuity is a tax-deferred financial product designed to allow investors to invest for growth potential and provide income for retirement or other long-term life goals. In essence, an annuity is a contractual agreement in which payment(s) are made to an insurance company, which agrees to pay out income or a lump sum amount at a later date. Variable annuities are subject to market risk including loss of principal. There are fees and charges associated with a variable annuity contract, which include, but are not limited to, operations charges, sales and withdrawal charges and administrative fees. The withdrawal charge declines from 6% to 3% over five years for Investment Edge®. Earnings are taxable as ordinary income when distributed and may be subject to an additional 10% federal tax if withdrawn before age 59 ½.
This content is not a complete description of all material provisions of the variable annuity contract. Please click here for the Investment Edge® prospectus. The prospectus contains more complete information, including investment objectives, risks, charges, expenses, limitations and restrictions.
There are certain contract limitations and restrictions associated with an Investment Edge® contract. For costs and complete details of coverage, speak to your financial professional/insurance licensed registered representative. Certain types of contracts, features, and benefits may not be available in all jurisdictions. AXA Equitable offers other variable annuity contracts with different fees, charges and features.
If you are purchasing an annuity contract to fund an Individual Retirement Account (IRA) or employer sponsored retirement plan, you should be aware that such annuities do not provide tax-deferral benefits beyond those already provided by the Internal Revenue Code. Before purchasing one of these annuities, you should consider whether its features and benefits beyond tax deferral meet your needs and goals. You may also want to consider the relative features and benefits of these annuities with any other investments that you may use in connection with your retirement plan or arrangement.
Not every contract is available through the same selling broker/dealer.
This website was prepared to support the promotion and marketing of AXA Equitable variable annuities. AXA Equitable, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state or local tax penalties.
Please consult your own independent advisors as to any tax, accounting or legal statements made herein.
The Investment Edge® 15 variable annuity is issued by AXA Equitable Life Insurance Company, New York, NY 10104. Co-distributed by affiliates AXA Advisors, LLC (member FINRA, SIPC) and AXA Distributors, LLC.
Contract form # ICC13IEBASE1, ICC13IEBASE2 and any state variations.
GE-2566287 (06/2019) (Exp. 06/2021)