Jackson National®

Annuity d MythologySM

Not FDIC/NCUA insured • May lose value • Not bank/CU guaranteed • Not a deposit • Not insured by any federal agency

As required by the IRS, you are advised that any discussion of tax issues in this material is not intended orwritten to be used, and cannot be used, (a) to avoid penalties imposed under the Internal Revenue Codeor (b) to promote, market or recommend to another party any transaction or matter addressed herein.

In its most basic definition, mythology is the study of myths. While

mythology is commonly associated with ancient religious and belief

systems, the concept can be readily transferred to the modern-day

myths surrounding annuities. Misconceptions abound, having gained

a foothold with both the general public and the media. These

misconceptions stem largely from a lack of information. Many people

simply do not understand the purpose of an annuity or how one can

be positioned within a portfolio to uniquely address and serve an

investor’s needs. The key to dispelling annuity myths and breaking the

mythology is to inform the public. Only then can the underlying

benefits and product features be understood and properly utilized. This

booklet is intended to do just that.

Annuity d MythologySM

myth

reality

“Annuities are prohibitively expensive.”

Variable annuities offer a variety of benefits,which many investors find worth the costs.

myth one

One persistent myth is that variable annuities are dramaticallyoverpriced and simply cost too much. The fact is, their many uniquebenefits often justify any incremental costs, and variable annuities are often not significantly more expensive than other investments.

Annuities are long-term, tax-deferred vehicles designed primarily forretirement. As contracts with insurance companies, annuities canprovide valuable death benefit protection for your heirs should youdie prematurely, or provide you with guaranteed income optionsregardless of how long you live. Plus, today’s unbundled annuitiescan be custom-built so you only pay for features and benefits thatare important to you.

So, are the benefits worth the price? Well, that depends on you. If things like tax-deferred growth potential, tax-free exchanges,income guarantees and death benefits for your heirs are appealing, then a variable annuity might be right for you.

The Benefits of an Annuity

Tax-Deferral 3

Lifetime income 3

Death benefit protection 3

Tax-free exchanges 3

Tax-deferral offers no additional value if an annuity is used to fund a qualified plan, such as a 401(k)or IRA. Additionally, tax deferral may not be available if the annuity is owned by a “non-natural”person such as a corporation or certain types of trusts.Guarantees are backed by the claims-paying ability of the issuing company and do not apply to theprincipal amount or investment performance of the separate account or its underlying investments.

A common misconception is that annuities have lessattractive tax rates than other investments that are subjectto long-term capital gains rates. The reality is that thelong-term tax treatment is much more favorable thanmany people might believe, plus tax-deferred annuitieshave the added potential to accumulate significantly morethan vehicles which may be subject to taxation each year.

On the surface, gains withdrawn from annuities are taxedas ordinary income with rates as high as 35% (revised forJGTRRA 2003). But that’s not the whole story.

We have a progressive income tax system in the UnitedStates. In theory, that means the more income you make,the higher the tax rate you pay. However, our systemactually blends all the rates as you move up the scale. For example, a married couple, filing jointly, and earning$59,400 to $119,950 (2005), will pay between 13.8%and 19.4% on their earnings.

The blended rate depends on their actual income within the range. At the top of the range, they’ll beclose to 19.4%, but far less than the 28% marginalrate. So with an annuity, you’re really not talking abouta vehicle taxed at 35%.

Additionally, people tend to focus strictly on the effect of taxation during the income stage, withoutconsidering the substantial advantage of tax-deferral.Many investments are taxed annually. Therefore, whenthe tax bill is paid from the account, the assets arereduced each year and your income could also bereduced. Because annuities are not subject to annualtaxation, they can provide greater potential assetgrowth over time, and the dollars that otherwise wouldgo to pay taxes remain in your possession. Of course, at the time withdrawals are taken, taxes will be incurred on untaxed earnings.

So when you break it down, greater potential for tax-deferred accumulation coupled with a blended tax system, can translate into a significant advantage.

Please note: The tax rate for long-term gains is 15% or 5%, depending on income.

myth

realityThe effective tax rates on variable annuities are seldom as high as you might think.

“Annuities are not good investments because gains,when withdrawn, are taxed at higher ordinary income tax rates than other investments.”

myth two

Effective Tax Rates

13.8%-19.4% 28% Marginal Rate

35% CapEffective Tax Rates Blended Tax Rate

myth

reality

“If a trust owns an annuity, then the annuityloses its tax deferral treatment.”

A trust, based on previous Private Letter Rulings,can potentially be able to retain its tax-deferred

treatment if the beneficial owner is a person.

myth three

Many people mistakenly believe that when a trust owns an annuity,the tax-deferral benefit is automatically forfeited. While the rulesunder 72(u) do prohibit the tax-deferred treatment for non-naturalowners, that’s not the whole story. In fact, trust-owned annuities may be able to retain the tax-deferral benefit. Since 1986, PrivateLetter Rulings have been used to clarify when an annuity owned by a trust may still receive the tax-deferred treatment. And thoserulings generally hinge on the beneficial owner concept.

In a nutshell, if the beneficial owner of the trust is a person, then the tax-deferred treatment of the annuity has generally stood. And it makes sense. Annuities are long-term vehicles for retirement,and 72(u) usually denies tax-deferred treatment for non-naturalbeneficial owners. However, a trust can generally retain its tax-deferred treatment if you can establish that the trust’s beneficial owner is a person.

Beneficial Nominal Relationship

Trust Tax-deferral

Jackson National Life Insurance Company®, Jackson National Life Insurance Company of New York®

and their affiliates do not provide legal, tax, or estate-planning advice. For questions about a specificsituation, please consult a qualified adviser.

The tax treatment of an annuity at the owner’sdeath is often misunderstood. Many peoplebelieve that because annuities don’t receive a step up in basis at death, they create anegative tax liability. In actuality, annuities canhave advantages over other investment types.

Annuities are subject to estate and incometaxes, and the beneficiary is liable for incometaxes. To alleviate the threat of doubletaxation, the Internal Revenue Code providesan income tax deduction to the beneficiary,called the Income in Respect of the Decedent,or IRD. This provision allows the beneficiary todeduct the estate taxes, paid by the estate, onhis or her income taxes. The deduction canonly be claimed as an itemized deduction.

To clarify this potential advantage, let’sconsider a hypothetical example. SupposeSteve has amassed an estate worth $3 million,which consists of a $1 million annuity thatwas originally purchased for $100,000. UponSteve’s death, his estate will be subject to amaximum 46% estate tax rate. Steve namedhis son John, age 50, as the beneficiary of the annuity. John is in the 28% income taxbracket. John is eligible to take an income tax deduction on the IRD, which is subject toannual adjusted gross income (AGI) limitationsfor itemized deductions. The ability to usethe full deduction is limited by the annualthreshold, which is adjusted each year. If

John exceeds this threshold, his ability to use the full deduction will be reduced. Tomaximize the deduction, John will have tocarry it forward into future years. John needsthe continued tax deferral and future incomemore than he needs an immediate lump sumdistribution, so he decides to stretch thedistributions and is thus required to take a distribution of $30,000 in the first yearfollowing Steve’s death.

John’s AGI for that year is under the AGIphase-out threshold (using 2006 rates),including the distribution, and his taxableincome is $95,000, resulting in his incurring2006 income tax liability of $20,931.50. Over the period that he receives annualdistributions, his income tax liability will be $252,000 based on the $900,000 IRD.

John’s payout option provides for gains from the annuity to be paid out first, thenthe principal after that. He is thereforeentitled to an income tax deduction equal to the amount of estate tax paid on the IRDthat he received. The result is his receiving an income tax deduction in that first year of $13,800, reducing his income tax liabilityto$17,067.50 from $20,931.50 and providing income tax deductions over the life of the stretch distributions totaling$414,000 on the $900,000 IRD.

myth

realityAnnuities, when inherited, can have advantages over other investments.

“Annuities are treated the same way as other assets when inherited.”

myth four

*Investors should take into consideration possible changesto tax laws, the impact of inflation and other inherent riskswhen making decisions regarding distribution options.

myth

reality

“Annuities provide no additional value when held by a qualified plan or an IRA.”

“The living and death benefits offered in annuities mayprovide reason to invest qualified assets in them. “

myth five

Many people argue that qualified money doesn’t belong in individualannuities. The main reason cited is that you end up paying for thebenefit of tax deferral. Nothing could be further from the truth.Annuities do not, in fact, charge for tax deferral, regardless ofwhether it is qualified or non-qualified. The tax-deferred statusinherent in annuities is actually a result of longstanding federal law.And while the benefit of tax-deferred growth may be duplicated, the benefit actually costs the investor nothing.

It is important to note that annuities may not be appropriate forqualified money if the only benefit of the product is tax deferral, nor are they intended for short-term investors, or where requiredminimum distributions will result in a withdrawal charge. However,annuities may be appropriate for qualified plans when the otherbenefits, such as lifetime income payments, family protectionthrough the death benefit and guaranteed fees, support therecommendation.

And, it is important to bear in mind that variable annuities, bothqualified and non-qualified, are fee efficient for those who want avariety of investment options from professional portfolio managers and believe in rebalancing their portfolios. How much benefit has beenderived from the death benefit option? The National Association forVariable Annuities (NAVA) reports that VA death benefits paid out in2003 exceeded the cash value of those contracts by more than $1.2billion! Anyone who says that qualified money does not belong in an annuity most likely does not understand annuities, including theadditional advantages they can provide.

Ceruili Associates, 2001

Annuity Sales

62%Qualified

38%Non-Qualified

Source: VARDS, 1st Quarter, 2005

A common misconception is that by addingmoney to a 72(t) or 72(q) program, you canincrease the annual amount received. This issimply false. As many investors are aware,Internal Revenue Codes 72(t) and 72(q) allow individuals to make penalty-freewithdrawals from their former employer-sponsored retirement plans. The regulationswere established to ensure that individualswith a serious need for income before age591⁄2, such as a layoff or an early retirementsituation, would have the flexibility to removemoney from their retirement plans withoutpaying the 10% federal tax penalty.

There are, however, a few importantstipulations. To remove money and avoid the penalty, withdrawals must be made insubstantially equal periodic payments, whichcannot be altered until age 591⁄2 or for atleast five years. One of the most commonmisunderstandings is that by adding money

to the retirement account, either throughtransfers, exchanges or rollovers, you canincrease the amount withdrawn each year. But the revenue codes clearly forbid this sort of material modification, insisting instead that such transactions void the individual’sexception provided in Internal Revenue Codes72(t) and 72(q). Once voided, you can expectto owe the 10% federal tax penalty on theentire amount withdrawn in the tax year theexception is voided. Understanding this mythcan save you a big IRS headache!

myth

realityAdding funds to a retirement account with an existing72(t) or 72(q) program voids the individual exception.

“You can add more money to a 72(t) or 72(q) program in order to change the income amount.”

myth six

The Effect on Withdrawal Requirements

Value: $100,000

72(t) or 72(q) maximum withdrawal: $15,000 per year

Additional contribution $50,000

Individual Exception Voided! Taxes and penalties due!

The above example is purely hypothetical.

myth

reality

“An IRA beneficiary’s beneficiaries can stretchthe balance over their own life expectancies.”

Death distributions can only be stretched overthe original beneficiary’s life expectancy.

myth seven

Another common belief is that an IRA beneficiary’s beneficiary has thesame distribution options as the original beneficiary. Certain optionsremain the same, such as a lump-sum payment. However, the ability tostretch death distributions over his or her life expectancy is false. Onlythe original beneficiary has this ability.

Let’s consider a hypothetical example. At age 60, Joe purchased anon-qualified annuity. Joe passed away in the beginning of 2002, atthe age of 75. The death benefit on Joe’s annuity was passed to his40-year old son, Alan, as beneficiary. Because Alan did not need themoney in the account for his own retirement needs, he elected tostretch the benefits of his father’s annuity over his 43.6-year lifeexpectancy.* Alan was also able to name a new beneficiary anddecided to name his two daughters.

Upon Alan’s death at the end of 2028, assuming current tax laws, histwo daughters want to stretch the benefits again, but this time as thebeneficiaries of a beneficiary, they are not able to use their own lifeexpectancies. After considering possible changes to tax laws, inflation,and other risks, both elect to continue the distributions through theirfather’s life expectancy, thus reducing the impact of taxes, until theperiod has expired in the year 2045.

The stretch concept is designed only for investors who will not need themoney in the account for their own immediate retirement needs.

* Life expectancy is calculated using the attained age of the beneficiaryand IRS Table I. Distributions must begin by the end of the yearfollowing the year of death of the owner/annuitant. The beneficiaryhas 60 days, beginning with the date proof of death is received at the issuing Company’s Service Center, to elect the stretch IRA option.The hypothetical illustration results are not based on a specificinvestment product.

Death Benefit Timeline

Death of Owner

Life Expectancy Beneficiary Stretch

Death of Beneficiary

Death of 2nd Beneficiary

Some contend that the price of death benefits is too high. Those who have inherited moremoney than they would have without the benefit might disagree. The reality is that deathbenefits provide an opportunity to add value to annuity contract proceeds.

All annuities provide a guaranteed minimum death benefit, usually the greater of contributionspaid into the contract or the contract value at death. For example, if an annuity owner contributed$200,000, never withdrew any money, and it is only worth $150,000 at death,the beneficiarywould receive the full $200,000. The value of this benefit cannot be overstated, particularly in light of the bear market from 2000 to 2002.

Another death benefit often uniquely available to annuity owners is the step up. This feature,usually offered at an additional cost, locks in investment gains, if any, so that annuityinvestors can be confident that their beneficiaries will receive a stepped-up amount. Ofcourse, if the contract value is greater than the death benefit, their beneficiaries will receivethe contract value.

myth

realityDeath benefits can add value to annuity contracts.

“Death benefits are not worth the money.”

myth eight

Guaranteed Minimum Death Benefits (Hypothetical Example)

Contract Value

$200,000 Beneficiary Amount

The example above is hypothetical and for illustrative purposes only. Performance indicated is not meant to illustrate or predict the pastor future performance of any product.

Guarantees are backed by the claims-paying ability of the issuing company and do not apply to the principal amount or investmentperformance of the separate account or its underlying investments.

You and your adviser have a strong partner in JNL® or JNL/NY®.As an investment and insurance company with nearly five decades of industry experience, we deliver

innovative products and services that offer a wide variety of benefits and features, and represent an

excellent option for any diversified plan. Because many of our products come unbundled, you only pay

for the benefits and features that you need.

Three keys that set us apart from the competition:Control: We don’t force investment selection on any of our variable benefit offerings. Never do we

mandate a particular allocation or arbitrarily move client assets into more conservative offerings in order

to offset potential benefit payouts or benefit charges.

Cost: Through the open framework of our PerspectiveSM family of variable annuities, the costs of our

products and product features, including the underlying subaccount options, are always clearly disclosed.

And we never disguise or increase costs elsewhere in order to offset our unbundled pricing strategy.

Options: We stand behind a suite of living and death benefit options that go beyond those associated with

traditional consumer investments. Our contract owners can count on a variety of offerings within our variable

annuity contracts, which range from an income stream that cannot be outlived to an array of professional

money managers.

Consider our history of success.Founded in 1961, JNL evolved from a single-channel insurance company with limited products to a diversified

life insurance company offering a wide range of life insurance and annuities. Regardless of your life stage,

JNL and JNL/NY offer a financial solution that can represent a strong addition to your portfolio.

Why an annuity from Jackson National Life Insurance Company®

or Jackson National Life Insurance Company of New York®

should be part of your plan.

VADV12561VA 04/06 www.jnl.com | www.jnlny.com

Guarantees are backed by the claims-paying ability of Jackson National Life Insurance Company or Jackson National Life Insurance Company of New York, anddo not apply to the variable annuity’s principal amount or investment performance of the separate account or its underlying investments.JNL, JNL/NY and their affiliates do not provide legal, tax, or estate-planning advice. For questions about a specific situation, please consult a qualified adviser.Neither JNL nor JNL/NY encourage or condone unnecessary replacements or replacements that are not in the best interest of the customer.Tax deferral offers no additional value if an annuity is used to fund a qualified plan, such as a 401(k) or IRA, and may not be available if the annuity is ownedby a “non-natural person” such as a corporation or certain types of trusts.Annuities are long-term, tax-deferred vehicles designed for retirement. Earnings are taxable as ordinary income when distributed, and if withdrawn before age591⁄2, may be subject to a 10% federal tax penalty. Under IRC Sections 72(t) for qualified plans and 72(q) for annuities, however, the 10% penalty tax is notimposed on distributions that are part of a series of “substantially equal periodic payments.” Other restrictions and limitations may apply. JNL and JNL/NY willnot be liable for any unfavorable tax consequences resulting from use of the option selected.The Perspective family of variable annuities (VA220, VA220OR, VA250, VA250OR, VA410, VA410OR, VA210, VA210OR) are issued by Jackson National LifeInsurance Company (Home Office: Lansing, Michigan), and in New York, (VA220NY, VA250NY, VA410NY, VA210NY) by Jackson National Life Insurance Companyof New York (Home Office: Purchase, New York), and distributed by Jackson National Life Distributors LLC, member NASD. May not be available in all states andstate variations may apply. These contracts have limitations and restrictions, including withdrawal charges, recapture charges and excess interest adjustments(referred to as interest rate adjustments in New York). Variable annuities involve investment risks and may lose value. Please contact the Company for moreinformation. Jackson National® is the marketing name for Jackson National Life Insurance Company and Jackson National Life Insurance Company of New York.

Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlyingfund prospectuses, which are contained in the same document, provide this and other important information.Please contact your representative or the Company to obtain the prospectuses. Please read the prospectusescarefully before investing or sending money.