Structured outcome investing for retirement

If you’re putting money away towards a long-term goal like retirement, you likely know that stocks have, over long periods of time, done better than all other widely held asset classes, like bonds and precious metals. But investing over the long-term also means weathering some turbulent down periods, which could impact the retirement dollars you have when you’re ready to retire and start taking income.

One way to help weather the down periods and potentially mitigate their impact is to use what are called “structured outcome funds,” which seek targeted downside protection while offering the potential for market gains. Funds like this, which use pre-established downside and upside parameters, are now available in the new Advanced Outcomes Annuity, which has the advantage of also offering deferral of taxes on your earnings. Advanced Outcomes Annuity can add some clarity on your path to meet your financial goals.

What is a variable annuity?

A variable annuity is a long-term investment designed for retirement that works in two stages. It can help you while you are building assets in the growth stage with tax-deferred growth potential. When you are ready to draw on those assets in the income stage, annuities offer you choices for lifetime income via scheduled annuity income payments, in an optional process known as “annuitization.”

How do structured outcome funds work? These funds use parameters to target performance in different ways:

  • Target upside performance of an underlying market index, subject to certain factors over the fund’s investment term.
    • A fund seeks to deliver returns that are a stated percentage of an index return, known as a “participation rate.” For example, a fund with a participation rate of 50% will seek to deliver 50% of the index’s return.
    • A fund seeks to deliver index returns up to a stated amount, known as a “cap.” A fund with a 10% cap will aim to return 10% whenever the index has risen 10% or more.
    • A fund seeks to return a percentage gain that exceeds a rate known as a “spread.” A 2% spread means that, if the index rises 12%, the fund attempts to deliver a 10% return.
  • Seek to potentially limit losses through a floor, buffer, or downside participation rate. These rates allow you to target a specified measure of downside protection.
    • A fund seeks to limit losses to a specified amount. A 10% “floor” means the fund will attempt to limit losses to 10%, even if the underlying index decline is greater than 10%.
    • A fund with a “buffer” will seek to prevent losses up to a specified amount. A 10% buffer means the fund attempts to keep losses before fees and expenses to 0% for the first 10% decline in the underlying index. The fund will experience losses after the buffer is exhausted- a 15% decline in the underlying index means the fund will aim for a 5% loss.
    • A fund might seek to limit losses to a stated percentage of an index decline, known as a “downside participation rate.” For example, a fund with a downside participation rate of 50% will seek to deliver 50% of the index’s loss over the fund investment term. If the underlying index declines 10%, a 50% Downside Participation Rate fund will seek to limit losses to 5% over the length of the fund’s lifecycle.

It’s important to understand that the upside and downside parameters described above do not take in to account the impact of fees and expenses. The underlying index is the S&P 500 Price Return Index, which is different from the S&P 500 Total Return index because it excludes the reinvestment of dividends.

The benefits of structured outcome investing

By using structured outcome funds, Advanced Outcomes Annuity attempts to achieve a stated level of performance RELATIVE to the underlying index to deliver returns over a stated time period. Different time periods, known as “terms,” are available – from six months to six years – with the flexibility to change from one fund to another within the annuity as market conditions warrant (and without taxation due to the tax-deferred nature of annuities).

Flexible options

The Advanced Outcomes Annuity offers investment funds with different investment objectives and allows you the option of switching between funds as often as daily throughout the life of your annuity. The funds provide different levels of exposure to the potential upside of the S&P 500 price return index and varying protection parameters that seek to protect again against declines – all while any returns are tax-deferred.2

The annuity has a six-year withdrawal charge schedule, which means that if you decide to withdraw money before it has been in the annuity for six years, a company charge, which declines over those six years, will apply.

Help keep your growth goals on track

The Advanced Outcomes Annuity offers nine strategies that combine parameters in different ways, and new funds are offered monthly with stated term lengths. You can read more about the specific strategies in the following pages.

Here are the fund choices for Advanced Outcomes Annuity:
Milliman 6-Month Buffered S&P 500 with Par Up Outcome Fund

Milliman 1-Year Floored S&P 500 with Par Up Outcome Fund

Milliman 1-Year Buffered S&P 500 & Nasdaq with Stacker Cap Outcome Fund

Milliman 6-Month Parred Down S&P 500 with Par Up Outcome Fund

Milliman 6-Month Parred Down S&P 500 with Par Up Outcome Fund

Milliman 1-Year Buffered S&P 500 & Russell 2000 with Stacker Cap Outcome Fund

Milliman 1-Year Buffered S&P 500 with Spread Outcome Fund Milliman 6-Year Parred Down S&P 500 with Par Up Outcome Fund Milliman 1-Year Buffered S&P 500 & MSCI EAFE with Stacker Cap Outcome Fund

How the funds work

Let’s look at the Milliman 6-Month Buffered S&P 500 with Par Up Outcome Fund to see an example of how it might perform. This fund has a 65% Participation rate on the upside. That means if the investment is held until the end of the 6-month term the fund is expected to return 65% of any positive performance of the S&P 500, gross of fees and expenses.

For example, if the S&P 500 went up by 10%, your fund is expected to see a 6.5% gain after six months (65% of 10%), before fees. The par up rate resets at the end of the 6-month period.

In addition to the participation rate on the upside, this fund also offers downside protection, with a 10% buffer against declines. For example, if the S&P 500 falls by 8%, the fund seeks to not experience a loss. If the index falls by 15%, the fund aims for a 5% decline in value at the end of six months before fees and expenses.

The Milliman 6-Year Buffered S&P 500 with Par Up Outcome Fund has a par rate of 90%, the buffer is set at 20%, and the outcome period is six years. The fund seeks to participate in 90% of the S&P 500 gains over the six-year term and aims to offer protection against the first 20% of declines at the end of the six-year period, after which the buffer and participation rate reset.

The Milliman 1-Year Buffered S&P 500 with Spread Outcome Fund has a 2% “spread.” The spread is the pre-set percentage of index performance gains that the fund does not experience, before the investor participates in any gains, over a 1-year period. For example, if the S&P 500 is up 10%, the fund would experience a 8% gain gross of fees. The fund also seeks to buffer against the first 10% of losses.

The Milliman 1-Year Floored S&P 500 with Par Up Outcome Fund aims to set a 10% maximum decline gross of fees, or floor, over a 1-year outcome period, for any market decline. The fund’s upside participation rate is 55%.

The Milliman 6-Month Parred Down S&P 500 with Par Up Outcome Fund Fund has seeks a 50% downside participation rate level while aiming for a 70% upside participation rate that applies to the full 6-month outcome period. The upside rate of 70% means the fund will seeks to capture 70% of the S&P 500 gains, gross of fees, over the six-month fund term.

With a 50% downside participation rate, your fund aims to experience half of the market decline. For example, if the market is down 40%, the fund expects to experience a 20% decline. If the market is down 10%, the fund’s goal is a 5% decline.

The Milliman 6-Year Parred Down S&P 500 with Par Up Outcome Fund aims for a 50% downside participation rate while seeking a 80% upside participation rate, over the full 6-year outcome period.

The Milliman 1-Year Buffered S&P 500 & Nasdaq with Stacker Cap Outcome Fund aims to participate in the returns of the S&P 500, and gains exposure to the POSITIVE performance of the Nasdaq, up to a total cap of 10%, which is split equally between both index returns. There is no exposure to any negative performance in the Nasdaq. If the S&P is up 5% and the Nasdaq is up 7%, your fund expects to return 10%, gross of fees.

The fund’s downside exposure to the S&P 500 is limited by a 10% buffer. Let’s say the S&P 500 is down 8% and Nasdaq is down 10%. In this example, the fund would have been protected from the 8% S&P 500 decline since it is with the 10% buffer. The Nasdaq decline does not affect your fund’s performance.

If the S&P 500 drops by 12%, the 10% buffer aims to limit the portfolio loss of 2%.

The Milliman 1-Year Buffered S&P 500 & Russell 2000 with Stacker Cap Outcome Fund aims to participate in the returns of the S&P 500 plus the Russell 2000, up to a total cap of 10%, with a 10% buffer on just the S&P 500. There is no exposure to the Russell 2000 downside performance.

The Milliman 1-Year Buffered S&P 500 & MSCI EAFE with Stacker Cap Outcome Fund participates in the returns of the S&P 500 plus the MSCI EAFE, up to a total cap of 12%, with a 10% buffer on just the S&P 500. There is no exposure to the Russell MSCI EAFE downside performance.3

Make the Advanced Outcomes Annuity work for you

There are a lot of things in life outside of our control, including how the markets will perform over the long run. The Advanced Outcomes Annuity offers a degree of certainty through its innovative use of structured outcome investments.

Talk to your financial professional today to learn more about how the Advanced Outcomes Annuity can both grow and protect your assets now and into the future.

Advanced Outcomes Annuity offers structured outcome strategies with underlying funds that have characteristics unlike many other traditional investment products and may not be suitable for all investors. There is no guarantee that the outcomes for a specific fund term will be realized. For more information regarding whether an investment in these funds is right for you, please see the product and fund prospectuses.

1 Morningstar. Ibbotson 95-year historical capital market returns illustrating the growth of a $1 investment in four traditional asset classes from Jan. 1, 1926 to Dec. 31, 2020.
2 Investors who make purchases in a fund after the beginning of the fund’s term or sell units before the end of the fund’s term will experience different outcomes than the stated parameters (growth potential and downside protection options) on the term start date. The specified outcomes of the fund may not be realized, and the investor risks losing some or all of their investment in the fund.
3 Equity exposure is subject to a Par Down, Floor or Buffer rate in down markets and a Par Up, Cap or Spread rate in up markets. Hypothetical results are gross of fees and expenses. Indexes are unmanaged. You cannot invest directly in them. The rates, caps, spreads and buffers represented in these hypothetical examples are for illustrative purposes only and may not reflect the actual parameters available for the specified strategy. New rates are declared for each fund investment term. Please visit AdvancedOutcomesAnnuity.com for complete fund and rate information.

Spread rate is for illustrative purposes only. A new Spread rate is declared for each fund investment term. A new Par Up rate is declared for each fund investment term.

Important information

There is no guarantee that a Fund will be successful in its attempt to achieve its investment objective and/or Outcomes. There also is no guarantee that a particular options strategy will be successful. An investor may lose some or all of their investment in a Fund.

The parameters of the underlying Funds are designed to achieve or attempt to achieve their objectives over the entirety of the underlying Fund’s outcome period. Therefore, if you invest in these underlying Funds after its specified outcome period has already started, an investor risks an investment not experiencing the full effect of the parameters. Hence investors considering purchasing shares in a Fund after an outcome period has begun or redeeming shares prior to the end of the outcome period will experience returns that do not match those that the Fund seeks to achieve.

Variable Portfolio Risk: Amounts that you invest in the Variable Portfolios are subject to the risk of poor investment performance. You can gain or lose money if you invest in these Variable Portfolios. Each Variable Portfolio’s performance depends on the performance of its Underlying Fund. Each Underlying Fund has its own investment risks, and you are exposed to the Underlying Fund’s investment risks when you invest in a Variable Portfolio. For more information, please see the Underlying Funds’ prospectuses.

The funds available in the Advanced Outcomes Annuity are subject to market risk, including loss of principal. Downside market protection options provide limited protection from market losses over the course of the fund term. If you would like a guarantee of principal, AIG offers other products that provide such guarantees. The level of risk you experience and your potential investment performance will differ depending on the investments you choose.

Investors who make purchases in a fund after the beginning of the fund’s term or sell units before the end of the fund’s term will experience different outcomes than the stated parameters (growth potential and downside protection options) on the term start date. The specified outcomes of the fund may not be realized, and the investor risks losing some or all of their investment in the fund.

FLEX Options Risk: The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In a rare event, the Fund could suffer significant losses if the OCC is unable or unwilling to perform its obligations under the FLEX Options contracts. FLEX Options may also be less liquid than standard options which may adversely impact the value of the Fund’s FLEX Options and its NAV. In addition, the value of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference index; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different directions.

Transfers into new portfolio offerings take place on the 10th of each month. Existing funds and Money Market portfolio available at any time.

Nasdaq®: The Nasdaq,® Nasdaq-100,® Nasdaq-100 Index,® and QQQ,® are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use for certain purposes by American General Insurance Corporation and its wholly-owned subsidiaries and affiliates (collectively, “AIG”). The (“Product”) has not been passed on by the Corporations as to their legality or suitability. The Product is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).

MSCI EAFE: The product referred to herein is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such product or any index on which such product is based. The contract contains a more detailed description of the limited relationship MSCI has with Licensee and any related product.

S&P 500® Index: Tracks the performance of 500 large U.S. companies. It is one of the most commonly followed equity indexes. The S&P 500® Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by American General Life Insurance Company (“AGL”) and affiliates. Standard & Poor’s,® S&P,® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by AGL and affiliates. AGL and affiliates’ products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of purchasing such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® Index.

Russell 2000® Index: The variable annuity product to which this disclosure applies (the “Product”) has been developed solely by American General Life Insurance Company (“AGL”). The Product is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell 2000® Index (the “Index”) vest in the relevant LSE Group company which owns the Index. Russell,® Russell 2000,® FTSE® Russell,® and FTSE Russell® are trade mark(s) of the relevant LSE Group companies and are used by any other LSE Group company under license. TMX® is a trademark of TSX, Inc. and used by the LSE Group under license. The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) the purchase of or operation of the Product. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by AGL.

Variable annuities are long-term investments designed for retirement. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract, as well as the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59½, an additional 10% federal tax may apply.

An investment in Advanced Outcomes Annuity involves investment risk, including possible loss of principal. The contract, when redeemed, may be worth more or less than the total amount invested. Products and features may vary by state and may not be available in all states or firms. We reserve the right to change fees for features described in this brochure; however, once a contract is issued, the fees will not change. The purchase of Advanced Outcomes Annuity is not required for, and is not a term of, the provision of any banking service or activity.

All contract and optional benefit guarantees are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer from which this annuity is purchased. Contracts and features may vary by state or may not be available in all states.

This material is general in nature, was developed for educational use only, and is not intended to provide financial, legal, fiduciary, accounting or tax advice, nor is it intended to make any recommendations. Applicable laws and regulations are complex and subject to change. Please consult with your financial professional regarding your situation. For legal, accounting or tax advice consult the appropriate professional.

Advanced Outcomes Annuity is sold by prospectus only. The prospectus contains the investment objectives, risks, fees, charges, expenses and other information regarding the contract and underlying funds, which should be considered carefully before investing. A prospectus may be obtained by calling 1-877-445-1262. Investors should read the prospectus carefully before investing.

Advanced Outcomes Annuity is issued by American General Life Insurance Company (AGL), Houston, TX, in all states except New York. AGL does not solicit, issue or deliver policies or contracts in the state of New York. Distributed by AIG Capital Services, Inc. (ACS), member FINRA. AGL and ACS are members of American International Group, Inc. (AIG).

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