2012年9月27日 星期四

Why Consider Annuities For Retirement Savings?


Are You Trying To Make Retirement Plans?

If you plan to retire next month, or if you have no plans to retire for many years, you should still be making retirement plans. It is never too soon to make these plans. But even if you think your retirement is a short way off, there is not better time to start than now.

There are types of annuities that attract people with long and short term plans to retire. The best type of account will depend upon your own particular situation. I cannot predict the future economic situation of the world, the country, or particularly, any of my readers. I just want to explain a little bit about fixed annuities so you can decide if you would like to do further research on your own.

Single Premium Immediate Annuities For Retirement Income Now

People who plan to retire right away may look at single premium immediate annuities (SPIA) as a way to use their money to give them more retirement income. Of course, your own income will depend upon a number of things. The amount of money you have to put into the account, the returns of your particular annuity, and how long you expect to get your income will all affect how much money you can withdraw each month.

People use an SPIA as a way to turn a large sum of cash into income. This only works out well if you have that large sum of cash to use, and if you do not mind giving up control of that money for several years. If you change your mind, and take your principal out early, you may be subject to high penalties.

If you do have this large sum of money to set aside, you may be happy with the fairly low risk and decent returns of many fixed annuity plans on the market.

Deferred Annuities For Future Retirement Income

If you do not have a large sum of money today, but want to build an account for the future, you may want to consider a deferred annuity. You can fund this account with one cash payment today. Some accounts allow you to make future contributions over the course of years. So you might seed the account with a few thousand dollars now. Every year, you may add to the account. This will allow you to build up a fund if you have a few years before retirement.

This can be one way to increase your future retirement income. However, be sure that you will not need your money in the near future. Most of these plans have high surrender penalties if you take out your cash before the surrender date.

Are Fixed Annuities Right For Your Own Retirement Plans?

Everybody has different needs.

Many folks prefer bank savings accounts and certificates of deposits. These are considered very safe savings products. Most of them are fairly short term too. You will not have to lock your money up for years. But these days, most have very low returns.

Other folks like to invest in market products like stocks and bonds. These may have higher returns, when times are good, but can also be very risky when times are bad.

The main attraction of fixed annuities is that they are considered safe products, but can return more than bank savings accounts. This article cannot illustrate any particular product, or predict the future. I am just trying to provide you with a simple guide to one retirement savings alternative.




Consider some annuity advantages when you are trying to figure out the best way to plan for your retirement income. To dig a bit deeper, learn about single premium immediate annuity advantages too.





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Annuities 101


What is a fixed annuity, a variable annuity?

Simply put, both a fixed annuity and a variable annuity are amounts payable annually. More specifically, they are contracts offered by insurance companies which allow you to accumulate funds for retirement on a tax-favored basis and then, if you choose, receive a guaranteed income payable for life or for a period certain such as five, ten or twenty years. Usually the payments are made monthly, but many companies offer to make the payments quarterly, semi-annually, or annually. Most of this discussion will focus on the fixed annuity.

How do they work?

Both a fixed annuity and a variable annuity are vehicles for accumulating retirement savings. You pay a premium to an insurance company and they promise to pay you interest. Unlike other retirement savings instruments, as long as you keep your money with the insurance company, you are not required to pay income tax on your gains.

This is what is known as 'tax deferral.' Only when you decide to withdraw your funds are your gains subject to income tax. A fixed annuity also differs from other retirement savings plans in another important way. When you decide to withdraw your funds, the insurance company will give you the option to receive a guaranteed income for as long as you live.

What are the advantages?

All fixed annuity variations have three primary advantages: Tax Deferral, Avoidance of Probate, and a Guaranteed Income for Life.

Who offers fixed annuity products?

Fixed annuities are offered only by insurance companies licensed to underwrite life insurance and annuities by the state in which you reside. Most insurance companies are subject to financial requirements specifying the minimum reserves the company must maintain on its policies.

Who sells them?

Only agents licensed by the states to sell life insurance may sell you a fixed annuity. This includes every licensed life insurance agent in your state as well as most financial planners and stock brokers.

Why is Guaranteed Income for Life an advantage?

Annuities are the only savings vehicle which offer a guaranteed income for life. With every other type of accumulation plan you can never be sure your income will continue for as long as you live. The insurance company calculates a guaranteed income payment based on your age, life expectancy and interest rates it will credit. That payment is guaranteed for as long as you live.

Most insurance companies will also offer a guaranteed fixed rate of income for a specific period such as five to twenty years. The guaranteed lifetime income may be based on your life only, or based upon the life of both you and a joint annuitant, typically your spouse. In the event of a joint annuitant, the monthly income from your fixed annuity will continue until the last survivor dies.

What does Tax Deferral mean?

A tax-deferred fixed annuity receives special tax advantages. Under existing tax laws, any interest or gain is not taxable until you begin to actually receive the income, i.e. the tax payable on the gain is deferred. Therefore, since you pay no taxes while your money is compounding, you earn interest in three ways - interest on your principal, interest on your interest and interest on the taxes you would have paid if it had not been tax deferred. This results in increased earnings capacity of a deferred annuity over a bank CD or other fully taxable earnings.

Why is Probate Avoidance an advantage?

The other primary advantage over most other investment vehicles common to all annuities is the ability to pass on the proceeds upon your death directly to a beneficiary. Probate is a judicial process to establish the validity of a will. Assets in an estate typically cannot be passed on to heirs until the probate court has established the validity of the will and authorized the executor to distribute them. Because probate is a judicial process, the process can take anywhere between six and twelve months to conclude, and the legal expenses can be significant.

Proceeds from annuities and life insurance, on the other hand, are not subject to probate and may be passed to your designated beneficiary directly without going through probate.
What is required of the insurance company in order to meet its obligations?

To safeguard the funds of its contract holders or policyowners, an insurance company has to meet strict financial requirements. Most importantly these requirements include the establishment of a reserve which at all times must be equal to the withdrawal or surrender value of their total block of variable and fixed annuity policies or contracts.

In other words, the insurance company must set aside funds equal to the surrender value (principal plus interest less early withdrawal or surrender charges) of every annuity contract in force. In addition to these reserve requirements, state laws also require certain levels of capital and surplus to further protect their contract holders or policyowners.

Immediate Annuity

An immediate annuity provides for fixed annuity payments to begin immediately after the date of purchase. Payments may be scheduled monthly, quarterly, semiannually or annually according to prior agreement.

Often the proceeds from a life insurance policy or the sale of a home are used to fund an immediate annuity. Such annuity payments provide immediate, regular income for a period certain (5, 10, 15, 20 years) or for life, depending on the choices made by the immediate annuity owner.

Deferred Annuity

A deferred annuity provides for payments to begin on a future date known as the maturity date. A deferred annuity has an accumulation period and a payout or distribution period.
For example, a middle-aged wage earner could provide for an income supplement in their retirement years by purchasing a deferred fixed annuity. Lump sum or regularly scheduled payments would be contributed to the annuity account as it accumulates, then at age 65 when the annuity matures, additional income would be available through scheduled annuity payments.

Single Premium Annuity

A fixed annuity may be purchased with a single premium in which one cash payment establishes the contract.

The most common sources of such lump sums are proceeds from a life insurance death benefit, the sale of a home or winning the lottery.

Flexible Premium Annuity

A fixed annuity may be funded over time with an initial premium plus additional flexible premiums.
Both premium amounts and frequency may be flexible, thus accommodating convenient funding plans such as payroll deduction over several years of employment as well as changes in the owner's financial situation.

What is a Fixed Indexed Annuity?

A fixed indexed annuity (also called an index annuity, an indexed annuity or an equity indexed annuity) is a fixed annuity with an upside earning capacity and a guarantee against downside loss of principal. Its earnings are linked to a stock or equity market index such as the Standard & Poor's 500 Composite Stock Price Index or, simply, the S&P 500. Fixed indexed annuities (FIAs) have four guarantees:

1. Initial premium is guaranteed

2. Minimum rate of return

3. Take credit for increases (ups) in market, not corrections (downs)

4. Gains are locked in every year

How do they differ from other fixed annuities?

The primary difference between a fixed indexed annuity and other fixed annuities is in the way the annuity rate or earnings are credited to your account. A traditional fixed annuity credits interest with an annuity calculator that is set in the contract and may or may not be subject to market adjustments. A fixed indexed annuity leads to an interest crediting formula based on changes in the equity market to which it is linked. This formula spells out how interest is calculated, credited, how much additional interest you get, and when you get it.

The insurance carrier issuing the fixed indexed annuity also promises to pay a guaranteed minimum rate of interest. Even if the indexed earnings are lower, the minimum guarantee will apply and your account value will not fall below the guaranteed minimum. Both flexible premium and single premium deferred annuity contracts guarantee a minimum interest rate, often in the range of 1.5% to 3% based on between 90% and 100% of paid premium. The insurance company's annuity calculator will adjust account values at the end of each term.

What are the contract features or 'Moving Parts'?

The amount of additional interest that may be credited to a fixed indexed annuity is influenced most by the Indexing Method and the Participation Rate working together like form and function.

The INDEXING METHOD is the design by which the amount of change in the index is measured. For example, a method that measures the difference in the starting index level and the level on the one-year anniversary is an annual point-to-point. If this design "ratchets" up the account value (new principal) with each annual gain, the indexing method includes an Annual Reset feature. Currently, the industry's best selling equity indexed annuity is the MasterDex Annuity series from Allianz, which incorporates the more progressive design of a "monthly" point-to-point together with an annual reset. Functional differences in indexing methods will be explained in greater detail below.

Like a faucet, the PARTICIPATION RATE determines how much of the increase in the index will flow into the annuity account value. Let's say the fixed annuity calculator shows a 12% increase in the index, but your participation rate limits you to 70% of the gain. Your annuity rate of increase would be 70% of 12%, or 8.4%. Participation rates are variable and may be guaranteed only for a specific period or guaranteed not to be adjusted below a given minimum or above a specified maximum. One of the most popular fixed indexed annuities is the Keyport Index Multipoint from Sun Life Financial, which guarantees a 100% participation rate for the full contract term.

Some fixed indexed annuities place a CAP or ceiling on the annuity rate, establishing the upper limit the annuity may earn. An annuity earning an index-linked interest rate of, say, 9% may have a cap of only 7%, which would be the amount of increase credited.

Some annuities use AVERAGING to smooth out the highs and lows of the linked equity market index. Monthly averaging, for example, would use an annuity calculator which combines each month-to-month index closing value divided by 12.

Some annuities reduce the index-linked interest rate by subtracting a SPREAD, a MARGIN, or a FEE and crediting the balance. A positive change in the index of 11%, for example, with an administrative fee of 2.5%, would yield a net increase of 8.5%. Of the carriers who sell annuity products with spreads, margins or fees, such amounts will be subtracted only if the remaining index change is a positive earnings rate.

Indexing Methods

Annual Reset: Yield is determined each year by comparing the index value at the end of the contract year with the index value when the contract year began. The positive difference, if any, is the yield your fixed indexed annuity earns for the year. Any new positive (not negative) account value resets to become the new starting point for the upcoming year. Contrast this formula to owning a variable annuity or a direct equity investment in a bear market. With variables and stocks the owner may have a deep valley to climb out of before getting back to zero.

High-Water Mark: Yield is determined by the rise in index value at the contract annual anniversary points during the term. The positive difference, if any, is determined by comparing the highest index value and the index value at the start of the term.
Point-to-Point: Yield, if any, is determined by comparing the difference between the index value at the end of the term with the index value at the beginning of the term. The positive difference is added to your annuity account value at the end of the term.




http://www.Free-Insurance-Leads.com Author and developer of the Safe Money Seminar, a financial planning seminar for Seniors, Gary Le Mon serves as guest speaker on behalf of agents and agencies nationwide. He is coach, mentor and motivator to over 1,000 general agents in his insurance marketing organization, InsuranStar Marketing. See also http://www.Free-Insurance-Leads.com/free-annuity-leads.html





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2012年9月26日 星期三

Comparing Fixed Annuities Versus Bank CD's


For people that are ultra conservative and only want their funds in a bank CD, reconsider that situation and look into fixed annuities. Fixed annuity rates increase and decrease with market conditions, just like CD rates. However, there are differences between fixed annuities and CDs that may make the annuity a more valuable asset in specific situation.

Before delving into those differences, you should be aware that fixed annuities aren't for everyone. The person that has several years before reaching the age of 59 ½ should not consider putting all assets in a fixed annuity. If you remove the funds before the age of 59 ½, there's a 10 percent penalty on the growth. However, if they want tax-deferred growth or a higher rate of return on their IRA funds, a fixed annuity may be a very appropriate investment vehicle also.

How is a fixed annuity better than a CD? First, both fixed annuities and CDs have a penalty period. In annuities, the period is a surrender period and you receive a surrender charge. In bank CDs, the time charge is a penalty for early withdrawal. While the two are similar, there's a huge difference. When the term on a CD ends, the bank sends you a statement letting you know. Some people don't respond, either because they're busy, they forget, they're ill or simply out of the area. The CD then rolls over to another CD of the same term. Many CD shoppers notice that the specials are odd numbers of months, such as 56 months instead of 60 months. That's because if the CD rolls over automatically to another 56 months, the rate isn't as high as a standard number of months, such as 60 months, 5 years.

If you find that your CD rolled to a much lower non-standard term, you'll also notice that the interest is well below what the market conditions suggest. In order to remove it, and invest it at a higher rate, you have to face a new early withdrawal penalty.

There is no rollover for fixed annuities. While the interest rate changes according to market conditions, once the policy ends the surrender period, the company doesn't set a new surrender period. This means it's free from the worry of having your money stuck in a low interest bearing account. Any time you want, after the surrender period ends, the company allows you to withdraw funds.

Another important feature of a fixed annuity that makes it a superior investment over bank CDs is the tax-deferred interest. If you simply want to allow the funds to grow and pass to heirs, with the option of invading them if you need to do that, fixed annuities allow the money to build faster and grow tax-deferred.

Tax-deferral is important if you're a senior. You don't have to be in the 33 percent bracket to reap rewards. If your income borders on the limit where you might have to begin to pay taxes on the second half of your social security, tax-deferred growth saves thousands of dollars each year.

No matter what your situation, it pays to diversify your investments. If you simply cant' tolerate the fluctuations of the stock market and find that type of diversification unsuitable for you, consider at least, diversifying within fixed products. A fixed annuity is one way to do that.




Jonathant Tyler provides information and strategies for retirement. If you're interested to learn more about annuities or to get a fixed annuities quote without obligation, come see us. We provide up to date information on the retirement investment market, and the options available.





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3 Types of Special Usage Annuities


There are multiple books that have been written on special usage annuities and I will briefly go over the 3 most common used strategies for each.

Charitable Gift Annuity

In a charitable gift annuity a donor gives a gift to a legitimate 501(c)(3) charities in exchange for a lifetime income to the donor. Usually the income goes directly to the donor is set up 100% joint and survivor to the owner and the spouse. This agreement is between the charity and the donor of the gift.

The donor or donors can make a donation to the charity with cash or other types of securities. There are a lot of charities that will not take real-estate as a donation because of an incident a few years back regarding the Boy Scouts. A donor gave the charity some property and the property was contaminated and the charity was stuck with the cost of the clean up. I do not of one charity that will act as a 3rd party who will take the hard assets and they will be liable for any cleanup prior to giving the property to the intended charity.

Structured Settlements

A structured settlement is ordered by the courts because of a personal injury lawsuit. The injured party (plaintiff) agrees to receive a systematic series of payments over a lifetime or for a certain amount of years. The courts like this avenue for children or for incompetent people who will not be able to properly manage a large sum of money.

Split Annuities

A split annuity is not an annuity at all. A split annuity is a concept consisting of multiple annuities. They are structured where one annuity will make payments over a period of time while the other annuities growing to restore their original principal at the end of that time period. The owner splits their money into multiple insurance carriers. The split consists of an immediate annuity and maybe one or two more deferred annuities. Once the immediate annuity is over, the deferred annuity is placed into another immediate annuity and the process starts all over again.

The advantage of a split annuity is reliable income and that your money will last. Because you are also using different time periods, you can enjoy rising interest rates in the future and are not stuck will a an immediate annuity that is paying past lower interest rates to you for life.

To find out more about special usage annuities, click on the link below in the resource box.




Visit http://www.annuitycampus.com for more annuity tips and tricks.

Robert holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors.





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Taxes on Annuity Death Benefits


The death benefits from an annuity are subject to income tax. The amount of taxes due will depend on the amount of money involved and how it is inherited.

The term death benefit can apply to either the funds in the plan or to a life insurance policy attached to it.

Annuities are a tax-deferred investment which means that taxes are due when funds are taken out of one. Therefore taxes will be due if a person inherits all of the money in one or takes all of the funds out. Many people get quite a shock because they are not expecting the funds or the increase in their tax bill.

Any money that you receive from an annuity including funds you inherit from one is reportable income. That means it could increase your tax bracket and your tax rate. If there's a large amount of money in a plan it will affect your tax rate. Any increase in the value of an indexed or variable annuity that you inherit will be regarded as an increase in income by the IRS.

Annuity Payments vs. Death Benefit

The only time you will be taxed on annuity funds you inherit is if they are distributed directly to you. If you simply take over the payments you will only have to report the payments on your taxes. The funds in the plan itself will still be tax deferred.

So you can keep your tax bill lower by simply becoming the beneficiary of the plan. This will only be of benefit to people over 59? years old because the IRS will charge a 10% tax penalty on money persons under that age receive from annuities. If Giorgio had an annuity and named his 65 year old brother Sid as the beneficiary Sid could receive the payments.

Make sure you read the annuity contract carefully before you set such an arrangement up. It will only be allowed if the plan allows you to take that step. Another option might be to roll the funds over into another kind of annuity. That can preserve their tax-deferred status. You will have to check with the IRS or a tax advisor to see if that is possible before attempting it.

Inheriting an Annuity

If you inherit an annuity you should be prepared to pay some additional taxes. Most people that inherit will not be able to continue as a beneficiary so they will have to take all of the funds out. That means they will have to report that income and pay taxes on it.

There are some ways to reduce your tax liability if this happens. One is to invest that money in a tax-deferred retirement investment such as a deferred annuity, an immediate annuity with deferred payments or an IRA. You may still have to pay some additional taxes but you could lower future tax bills. You will not have to pay taxes into funds you put into such plan until you take the money out.

A good way to keep this money out of your reportable income is to put it into a deferred annuity or an immediate annuity with deferred payments. In such an arrangement you can put payments until you retire. By taking that step most of your additional income will be in a tax-deferred arrangement that will provide you with a regular stream of income after you retire. You should only have to pay income tax on the payments and not the principal of the money in the plan.




Steven Hart is a freelance writer and a Financial Advisor from Cary, IL. He writes about Annuity topics like Annuity Calculator, and Annuities Good or Bad.





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Fixed Annuities Offer Numerous Options


An annuity may be either immediate or deferred. If income is important now consider an immediate annuity. Immediate annuities are usually purchased with a single premium and they provide income payments that begin immediately. The reason for buying an immediate annuity is to obtain immediate income and to make the insurance company the responsible money manager. The insurance company will assumed fiduciary responsibility for the income and will pay you on your selected time period.

If you are not yet ready for retirement, consider a deferred annuity. Deferred annuities provide income payments that can start many years later. Deferred annuities have an accumulation period, which is the time between when you pay premiums and when income payments start. The main advantage of a deferred annuity is to accumulate money on a tax-deferred basis, which can then provide an income at a later date.

A fixed annuity provides fixed dollar income payments backed by the guarantees in the contract. During the accumulation period of a fixed deferred annuity, your money earns interest rates set by the insurance company spelled out in the annuity contract. Most fixed annuities have a current interest rate and a minimum guaranteed interest rate. The company guarantees that it will pay no less than a minimum rate of interest. Many other contracts will offer a higher fully guaranteed interest rate for the entire length of the contract. You have numerous options in selecting the best annuity for you.

During the payout period, the amount of each income payment to you is generally set when the payments start and will not change. There are options available to the annuitant which can allow for changes based on outside circumstances. See your annuity contract for details of these options.

An equity linked indexed annuity is a type of fixed annuity, but its returns are based upon the performance of an equity market index, such as the Standard & Poor's 500 and the Dow Jones Industrial Average. New products are being released constantly with newer crediting choices and options. Equity linked indexed annuities offer safety and security while not tying your returns to the insurance company. The actual credited interest is set by the outside source.

Regardless of what the annuity offers it is important that the benefits match up to your needs and goals. Make certain you ask questions and it is always a good idea to obtain a second opinion.




Bill Broich helps seniors manage their retirement savings. Visit his website for more information: Free Annuity Booklet.





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2012年9月25日 星期二

Shop For Annuities by Carrier - Metlife Annuities


MetLife annuities offer a variety of solutions for individuals who want to save for their retirement, who have already retired, or who may be concerned about outliving their savings. MetLife annuities can use available assets efficiently, ensuring that savings will work hard for their owners.

Deferred Annuities from MetLife

Deferred annuities have a savings and investment phase and an income phase. During the savings and investment period, tax-deferred earnings accumulate, and annuity owners usually have access to this money. In the income phase, the account balance is converted to a guaranteed income stream meant to last throughout the owner's lifetime. There are two types of deferred annuities: the deferred fixed annuity, which provides a stable and fixed return on investment, and the deferred variable annuity, which offers greater flexibility and larger investment returns.

MetLife Deferred Annuity Products

The Preference Guaranteed Select® Deferred Fixed Annuity guarantees a lifelong stream of income and protects annuity owners from market volatility. Owners can accumulate cash on a tax-deferred basis, get a guaranteed interest rate, and have the flexibility to access plan funds when necessary. The Preference Flex Select® Deferred Fixed Annuity allows flexible contributions and offers a four-percent, first-year interest rate bonus, plus a guaranteed interest rate for one year. The Preference Plus Select® Deferred Variable Annuity allows plan owners to decide when and how they want to receive their retirement income and offers a variety of optional benefits at no extra charge for added customization.

Immediate Annuities from MetLife

Immediate annuities are designed to meet the needs of individuals who have already retired or who are nearing retirement. These plans provide payouts shortly after they are purchased. They are usually purchased with a single payment, which is converted to an income stream designed to last a defined number of years. Payments optionally may be passed to a beneficiary after the owner's death. There are two types of immediate annuities: fixed, which provides a predictable stream of income, and variable, which offers investment flexibility.

MetLife Immediate Annuity Products

The MAX Income annuity provides tax-advantaged, guaranteed income as long as it is needed, either for a specific number of years, or for the lifetime of the plan owner. The Preference Plus® Income Advantage (PPIA) is an immediate variable annuity in which an individual may choose to receive variable income payments or a combination of variable and fixed income payments.




To read more annuity articles from Steven, and to get your free online annuity comparison, visit Annuity Rates.
Annuity types have you confused? Use Steven's handy annuity investor guide to determine which annuity types is ideal for you: Guide to Annuity Types. Curious what annuities provider to choose? Visit Annuity Company Ratings.





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Annuity Payments


Annuities are a series of payments made by an institution like an insurance company to the annuitant at regular intervals of time over a fixed time period. The payments are fixed and may be on a yearly, semi annual, quarterly or monthly basis. Generally, there are two types of annuity payments called "ordinary annuities" and "annuities due".

Ordinary annuities require payments at the end of every period until the maturity period of the investment. For example, with bonds, usually the seller pays coupon interest payments to the buyer at the end of every six months. However, sometimes annuity payments will be made at the beginning of each period like a rent payment. These are called "annuity due". Depending on the frequency of annuity payments, annuities can be divided into deferred annuities and immediate annuities. In immediate annuities, annuity payments are made at much frequenter intervals. Deferred annuities will make the annuity holders receive payments depending on the nature of the annuity. If the deferred annuity is a fixed deferred, the holder will get the guaranteed rate of return at regular intervals over the life of the contract. If it is variable deferred annuity, the payments depend on the performance of the underlying investment. This means the annuitant will not receive any guaranteed amount. However, the payments under the variable annuities are tax-free or tax-deferred.

There are several types of annuity payments depending on the nature of the annuity. If the annuitant or the nominee receives payments after the fixed period in spite of any contingency, such payments are called "annuity with period certain". If an annuity payment continues after the death of the annuitant, it is called a "life annuity" payment. If it continues over the annuitant's life or for a fixed period (whichever is longer), it is called "life with period certain". The latest version for annuity payments is called "equity-indexed annuity payments".

It is not advisable for the annuitant to get cash value of the annuity by cashing out, unless the annuitant is under financial stress. The ultimate responsibility of cashing out an annuity and getting the payments rests on the shoulders of the annuitant.




Cash For Annuities provides detailed information about cash for annuities, annuity brokers, annuity buyers, annuity payments and more. Cash For Annuities is the sister site of Senior Settlements Info [http://www.e-SeniorSettlements.com].





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Indexed Annuities - They Hybrid Annuity For Retirement Investors


Newer products on the market that rival the popularity of both the fixed annuity and variable annuity are the indexed annuities. Indexed annuities offer the stability and safety of the fixed annuity and the potential for more growth and inflation fighting properties of the variable annuity.

The indexed annuities use a specific index, such as the S&P 500 as the basis for the growth of the policy. They offer a low base return if that particular market doesn't increase or remains flat. If, however, the market grows, then policy offers the owner a percentage of the growth or the entire amount. Most policies contain a cap.

By using a percentage of growth and cap on the return, in good years, the insurance company recoups the money they lose if the index drops and they pay the guaranteed rate. The lower base rate, cap and percentage of growth are your payment for participation in the lucrative years.

Assess you situation to see if indexed annuities are right for you. The product often fits perfectly into your portfolio if you're a soon to retire or younger retiree and you want to avoid risk. For those that are in their advanced senior years, the higher guaranteed rate of the fixed annuity often serves their purpose better. However, if there's a need to diversify investments they should consider this choice.

Another factor in deciding which of the indexed annuities is best for your situation is your need to access the funds. Some people simply want the tax deferred growth provided by the annuity and a higher potential for growth. They have enough assets to know they'll never use the funds and simply want to pass them to heirs. Penalty free access is of no importance to this type of person. If you worry that your emergency fund might not handle all the potential emergencies, or know you'll need some extra dollars in a few years, the penalty free access is important for you.

Just like the penalty free access, the surrender period penalties and length varies in importance from individual to individual. If you have specific plans for the money in future years, always check the length of the surrender period.

Of course, if you're younger than retirement, annuities might not be the best product for your situation. Since annuities have tax deferred status, they operate similar to an IRA when you withdraw funds. If you're under the age of 59 ½, you pay a 10 percent penalty on the growth of indexed annuities when you withdraw money. You also pay taxation on the growth at that time. Since the IRS considers the interest the first removed from any policy, any amount you take out has a tax penalty and taxation.

Look for the various percentages of participation and caps on the policy before you invest in indexed annuities. The index the policy uses as its basis is also important. The easiest way to compare indexed annuities is with the use of websites that show comparisons of several policies. These sites often don't sell policies but simply provide information for the concerned consumer.




Jonathan Tyler educates people on their options for retirement. In this article he discussed the benefits of indexed annuities for retirement and how they're different from the much more common fixed and variable types. If you'd like to learn more about annuities come see us.





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2012年9月24日 星期一

Annuity: Homerun or Foul Ball?


I find the never-ending debate around annuities (good retirement investment or bad retirement investment?) fascinating and of personal interest, because I purchased a deferred annuity contract not too long ago. And you know, I was actually feeling kind of good about my annuity investment until recently when a financial advisor I engaged pointed out to me how expensive the fees were and suggested I might want to cash out my annuity at some point. The truth is my feelings about my annuity tend to ebb and flow with financial market performance, and I was already experiencing some misgivings about my purchase even before my meeting with this financial advisor.

So, why do I get a little queasy when I think about my annuity? First, prior to purchase, I never saw myself in an annuity. An annuity always seemed like a very conservative investment and I always considered myself more of gun slinger when it came to "playing" the market. Typically, I would have a liberal allocation to stocks and a conservative allocation to bonds, even as I got nearer to retirement age. Of course, my boat was rocked like everyone else's during the 2008-2009 recession when I saw my portfolio decrease by as much as 40%. I know this period changed my attitude about investments as I'm sure it did for many others, yet I held out like most and stayed pretty heavily invested in stock mutual funds. Still, the damage was done and a lesson was learned about the volatility of markets. Not that I wasn't aware of the volatility factor previously, but I had never experienced it like I did during the recession. In fact, as someone who is a little older, the markets had always been pretty good to me and setbacks were temporary at best. Most of the time my account balances were trending up.

It was the performance of my portfolio during the recession that first got me to think about the benefits of regular income in retirement that could be realized with an annuity. Adding to my concern at this time was the fact that my defined benefit pension plan had been frozen in the early 90's, and I really had no regular income I could count on in retirement apart from social security. Still, I seriously questioned tying my money up in an annuity which only stepped up 5% a year pre-distribution, and I pay for this step-up via a fee. I felt I could be left far behind should the market take off and we begin seeing double digit returns again.

Besides my concerns about tying my money up and possibly missing the upside of good market, I had all the other concerns that investors often have about annuities. I found my annuity contract to be extremely complex and I can honestly tell you today that I'm not 100% sure I fully understand the package I bought. Frankly, I don't think I'm alone here. I'm not sure the financial pro that convinced me to buy my annuity fully understood all the nooks and crannies of the contract I signed. Still, I felt that I had a good enough grasp on the contract details that I was comfortable in signing the contract. The key issue for me was having a steady flow of income in retirement and I was confident that this contract would meet my need in this area.

I had other concerns. I, like the financial advisor I recently engaged, was concerned about the high cost that went with my deferred annuity contract, because I bought the "Cadillac package"; the one that offered a guaranteed increase in benefit each year up to distribution and a death benefit. I knew this would cost me a lot in fees each year and, as indicated, my financial advisor drove this point home again in our very first meeting. He also mentioned that the sales person received a very nice commission for getting me into my annuity. The fact is I was already aware of this, but my financial advisor wanted to make sure this point didn't get by me.

My concerns did not end with the possibility of missed market opportunity and high costs. Another big concern I had with my annuity was the security behind it. If I put money in a bank, I know I have the protection that the FDIC provides. When I put my money into this annuity, the stability of the insurance company that sold me my annuity will determine if I see a benefit from my contract. To better ensure a payoff from my annuity, I bought from a major player. Still, American International Group/AIG (not my annuity provider) was a major player and nearly collapsed, and there have been concerns expressed about the stability of other large insurers recently. I do understand there is an industry-financed safety net for people like me should an insurer fail and not be able to live up its obligations.

All in all, it was a tough-tough decision to buy an annuity contract for all the reasons cited here, and it took me months to make my decision. Yet, I made the leap. "Why?", you ask.

Besides wanting a steady flow of income during retirement, as I've already pointed out, I also wanted the safety net that an annuity provides when investing in volatile markets. What I mean by this is that I continue to invest in the market and, of course, with the market comes risk. What my annuity has done, is it has allowed me to sleep better at night, because I now know that no matter how bad the markets get, I will always have the cash flow peace of mind in retirement that comes with owning an annuity. In baseball terms, I feel like I've hit a solid double with my annuity, and I'm hoping I can now hit a home run or two with the riskier investments outside of my annuity. Some financial advisors will recommend that you have enough regular income in retirement between social security, pensions and annuities to cover all your basic needs. I'm not there, but I'm part of the way there. I still consider myself a risk taker and I don't want to be too comfortable, because I don't think putting money in my mattress is the way to go, but my annuity does make me feel a lot better about taking and accepting risk. And I do sleep a little better knowing I have an annuity should we experience another recession like the last one. Yes, I'll always wince when I see the costs for my annuity and it will likely never be viewed as a homerun investment, and there'll always be some small risk regarding my insurer's ability to pay, but on the whole it works for me.




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Why You Should Consider Owning an Annuity As Part of Your Investment Strategy


Most investors are familiar with the idea of utilizing mutual funds to form the basis of their investment strategy. Ask them whether they would consider buying annuities to diversify this strategy and they may well stare blankly at you. This is hardly surprising as a sizable proportion of investment advisors are equally wary of incorporating annuities into their clients' portfolios.

This article will attempt to de-mystify this much under-used form of financial investment by explaining what an annuity actually is and assessing what circumstances, if any, favor their use.

At the most basic level there are two types of annuity, namely immediate and deferred. An immediate annuity involves paying a lump sum to an insurance company that guarantees to repay a fixed amount to the investor every year for an agreed term. The period of time involved will be either your lifetime or for a fixed number of years. Generally your money is not invested in the stock market but earns a small return over the period of annuitization.

If you choose the lifetime option your payments will be based on life expectancy derived from IRS mortality tables. The advantage of this option is that you will receive the guaranteed annual payout even if you exceed the assumed life expectancy period. The downside of this option occurs when you die before the assumed life expectancy period expires, in which case the insurance company keeps the balance of your investment.

A deferred annuity is designed to provide you with an income at some agreed point in the future, usually upon retirement. A major advantage of this option is that you are not liable for tax on the annuity each year allowing you to benefit from a triple compounding effect. Your investment continues to grow untaxed with gains taxed only when you withdraw money from the annuity. Such earnings are treated as ordinary income rather than capital gains.

The three most popular types of deferred annuity are the variable annuity, fixed annuity and index annuity. A variable annuity is essentially a tax-deferred mutual fund with death guarantees built in. This type of annuity is composed of several mutual funds, or sub-accounts, so the value of the variable annuity is dependent on how well these funds perform. The advantage of this type of investment is that the investor's beneficiary will receive a guaranteed dollar amount on his or her death.

Fixed annuities provide the investor with a guaranteed rate over the term of the contract. The rate payable is agreed at the time of purchase and does not fluctuate in response to market conditions. The fixed annuity shares the deferred tax advantages of the variable annuity but the benefit payable on death is limited to the contract value at the time of death. All in all the fixed annuity represents a more conservative form of investment and will therefore appeal to a sizable segment of the market.

Index annuities are a mixture of the variable and fixed versions. Generally, your investment will be tied to the performance of a named index with some downside protection built in to ensure the value of your investment does not fall in any given year. Unfortunately there will also be a cap on how much your investment can earn in a given year. The index annuity may appeal to investors who welcome the opportunity to beat inflation by linking to market growth but also want to enjoy the comfort zone provided by this particular investment vehicle.

Clearly, putting your money into annuities or any other form of investment warrants a great deal of careful consideration. In some circumstances annuities may represent the best option available, but this will not always be the case. Always seek advice and guidance from a qualified expert in this field before investing your money, but don't be afraid to ask relevant questions about the full range of investment options available.




Richard Mitchell owns and operates [http://www.insurancepolicyreport.com/]





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Charitable Gift Annuity - Immediate, Deferred, College, Flexible Annuity


For some people, a Charitable Gift Annuity (CGA) is a convenient way to donate funds to an educational, religious or other charitable organization. A Charitable Gift Annuity works very similar to other annuities you might purchase through your insurance company, but in this case you will receive an annuity payment directly from the organization. Typically, you donate a monetary amount to the organization of your choice and then begin receiving payments either immediately or at a predetermined date in the future.

Donations to charities are subject to the charitable tax deduction, and you are entitled to make this deduction on your income tax return for each year you make a new donation. You can choose to receive your annuity payments yearly, quarterly, or monthly, although most people choose quarterly payments. Quarterly payments from a Charitable Gift Annuity are received on the last day of the quarter, not the first.

Similar to other annuity options, Charitable Gift Annuities are subject to state and federal regulations. The American Council on Gift Annuities (ACGA) sets uniform gift annuity rates for use by charitable organizations. These rates set the recommended limits for payout rates to the donor.

If a charity stays at or below these rates, they are not required to justify that their rates are within state regulatory laws. If the charity chooses rates above those set by the ACGA then an actuary is necessary to ensure compliance to the individual state laws. Rates are determined by the age of the annuitant and when the withdrawal period for the annuity begins.

A charity may spend a portion of a donation immediately but must retain enough money in its reserve to satisfy its annuity agreement with the donor. The agreement for Charitable Gift Annuities states that the annuitant will receive fixed payment amounts for their lifetime only and not an additional period of time thereafter for their beneficiaries.

This means that once an annuitant dies, payments cease and the remainder of the annuity is absorbed by the charity. The donor can opt to extend the annuity agreement to an additional annuitant, as with the joint and survivor or two lives in succession options, but the annuity payments will be split between the two individuals and will cease after both parties have died.

DIFFERENT TYPES OF CHARITABLE GIFT ANNUITIES:

IMMEDIATE GIFT ANNUITY

1. If you choose an Immediate Gift Annuity, payments will begin in the payment period immediately following the final contribution date. As mentioned previously, the annuitant can choose to receive payments annually, quarterly, monthly, etc. Depending on when the contribution was made, you can request your first payment to be for the full, and not prorated amount.

DEFERRED GIFT ANNUITY

2. With a Deferred Gift Annuity, the annuitant is allowed to receive payments at a future date predetermined by the donor. The date chosen must be at least one year from the contribution date, but the payout schedule offers the same flexibility as the Immediate Gift Annuity.

COLLEGE ANNUITY

3. A parent or grandparent may want to establish a college fund for a child to offset the rising cost of higher education. In this case, they would donate money for a College Annuity which will only pay out over the lifetime of the child (annuitant). Payments usually begin at age eighteen, or when the child/annuitant is old enough to attend college. The annuitant may choose payments for life or receive larger payments spread out over the number of years they attend school.

FLEXIBLE ANNUITY

4. A Flexible Annuity allows the annuitant to decide the starting date for payments. Usually the annuitant chooses retirement or another date of importance to begin receiving payments. Keep in mind that one factor for the annuity payment rate is age, so you will receive larger payments if you wait until you are older.

HOW DOES A CHARITABLE GIFT ANNUITY WORK?

You may be asking how this works in a real life example. Let's assume you just turned seventy-five and have $25,000 that you would like to donate to your alma mater as a Charitable Gift Annuity. You opt to receive immediate annuity payments on a yearly basis, and your calculated annuity rate is eight percent. Based on your annuity agreement with your alma mater, you will receive a payment for $2000 every year for the rest of your life, and an immediate tax deduction of over $9000!

This is only an estimate, and your actual deduction will vary according to changing tax laws and changing rates established by the ACGA. You should always consult with a knowledgeable financial advisor such as Estate Street Partners before donating or investing large sums of money to guarantee your rights are protected.




Author bio - Rocco Beatrice, CPA, MST, MBA
Award-winning estate planning & trust expert
MS - Taxation, Master of Science Taxation
MBA - Management / Taxation
BSBA - Management / Accounting
CPA - Certified Public Accountant
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The Ins & Outs of an Annuity


The first question you're likely to ask yourself when entering the annuity universe is how does an annuity work? The answer to how does an annuity work depends on the type of annuity program you select. Deferred annuities provide an accumulation of retirement assets, while deferred annuities are designed to provide a stream of income, typically within a year of the annuity contract's purchase.

Types of Annuities

The simplest type of annuity is called the Single Premium Annuity (SPIA), and it requires you to make a lump sum payment to an insurance firm on the date at which you want payouts to begin. Payments may be maximized for as long as you live, if the SPIA contract specifies these payments. In this case, the payment amount is likely to be greater than returns produced from other kinds of fixed-dollar investments, but your income will not run out during your lifetime. On the other hand, if you die after receiving only a few payments under this contract, you will have put in more money than you ultimately received.

The Single Premium Deferred Annuity (SPDA) allows for deferred payments instead of immediate income. You make the single lump sum payment to the insurer, but payments to you will not begin until the contract's maturity date. On this date, you may take the total value of the contract or receive annuity payments. Some deferred annuity contracts will allow you to make periodic payments instead of the lump sum and build up value over time. As you make each periodic payment, the money in your account increases as a result. When you reach retirement age (or some other date specified in the contract), you will begin to receive annuity payments.

Annuity Options

There are different types of pay-in, withdrawal, and investment options available, depending on the kind of contract you select. With a single premium annuity, you invest a single lump sum amount, while flexible premium annuities let you make a minimal investment, with various payments amounts during the investment period. Fixed annuities generally use more conservative investment vehicles such as bonds, and guarantee your principal investment and minimum earnings interest rate. Variable annuities are usually invested in mutual funds, and the principal is not guaranteed. Also, the earnings on your investment determine your payouts.

Things to Consider

Annuities are not insured by banks, the Federal Deposit Insurance Corporation, or any other federal agency. These accounts are not deposits or obligations of a bank or a bank affiliate. They are not underwritten or guaranteed by any agency. In the case of a deferred annuity, there is an element of investment risk involved, including the loss of your principal.




I write columns on annuity investment. If you're looking for expert annuity advice, read more of my articles at: Annuity Articles Annuity types have you confused? Use Steven's handy annuity investor guide to determine which annuity types is ideal for you: Guide to Annuity Types





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2012年9月23日 星期日

Take The Structured Settlement Annuity Option Today


You never know when you are going to need a huge amount of money. You have gone in for an annuity plan that will be giving you a fixed amount of money for a certain period of time. When you realize that you need the money immediately, you go in for structured settlement annuity plan.

For a person who has never before heard of structured settlement annuity, the going is really tough. Just imagine this scenario: you have retired after thirty years of glorious service in a bank. You have ensured that a certain amount of your salary has been put aside and has therefore become the backbone of an annuity plan. One month after you retire, you realize that you need to have a large amount of money, since your son has decided to become an engineer. Why should this worry you? Well, as a doting father, you would like to ensure that he has enough to see him through college and university. For this you realize that the educational institution in which he is going to make his engineering dream a reality, will not accept monthly installments of fees. They would want the money upfront. So now, what is the solution: you need to be able to pay a whole lump sum of money, how do you achieve this?

One of your friends talks to you about the structured settlement annuity option that you can take. You want to know more about this option, so you log on to the net for more updated information on this option. You understand that there a few firms who are willing to give you a whole lot of money (equal to or slightly more than) which will be instead of the monthly payments that you were supposed to receive as annuity payments. Basically, the idea is that the company involved ensures that you get the money at one shot rather than having to wait every month for an annuity payment check.

The entire prospect of structured settlement annuity seems to be quite attractive. Since you have put in long and arduous hours of work for the last three decades or more, you are certainly entitled to having your money when you really want it. Now that your son has decided to go in for higher education, you need to supplement his scholarship with the money that you have. It is in this kind of a situation that the option of a company buying up your annuity comes in handy. You do not have to go through life waiting for your annuity payments; instead you get the money when you need it the most and make use of it as you deem fit. Since there are quite a few companies who specialize in structured settlement annuity options, you need to make sure that the company is a genuine one, before you enter into any kind of deal.




Francisco Segura owns and operates [http://www.annuity-reviews.com] Annuity [http://www.annuity-reviews.com]





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Annuities - What You Should Know First


Annuities can be a great part of an investment strategy for retirement. They offer tax deferred growth, the opportunity for a secured principal, and can offer many of the same growth opportunities as stocks and mutual funds. However, despite the many benefits, annuities are not right for everyone. Whether or not a variable, fixed, or index annuity is right for you, depends on many factors. In this article we will explore those factors, and address some of the questions you may have.

Although most people purchase an annuity with "money for retirement" on their mind, there is not necessarily a correct or incorrect age to purchase an annuity. An annuity can be purchased before retirement, as a tax deferred way to increase your money for retirement. It can also be purchased during retirement. Since you will be receiving payments at that time, it doesn't have the same tax deferred benefits, but it still can offer great benefit to people looking for a secure investment which protects their principal, provides monthly payments, while often providing them with a higher return than CD's or Government Issued securities.

One of the main issues to consider when purchasing an annuity is liquidity. Most annuities have penalties and taxes, if a withdrawal is made before the growth period ends. Until you are 59.5 years of age, you are unable to withdraw your annuity investment, without receiving a penalty. On top of the penalty your insurance company may charge, this will include a 10% IRS Tax penalty. Even after the age of 60, some annuities still come with penalties from the insurance company, if you'd like to take out more than your monthly payments. You should always consider your financial position and the liquidity of your other assets before deciding on a long-term annuity.

Although annuities are tax deferred, they are not as valuable as the tax deferred benefits you get from an IRA or 401k. This is because the money invested into your IRA or 401k is from pre-taxed funds. The money used to purchase the annuity, have already been taxed. If you have additional space, you should always fill your 401k, before purchasing an annuity. Once that space is filled, an annuity offers you additional tax deferred investment opportunities that other investments don't.

There are many reasons to purchase an annuity, and a number of reasons why you shouldn't - it all depends on your given situation. How lucrative your annuity investment is also depends on the type of annuity you get. Some insurance agents are better than others - and some more accurately represent your needs, than others.




Need research, on variable, fixed, or indexed annuities? Get variable annuity quotes or online information about variable annuities





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Annuities Defined - An Overview


Almost 80 percent of investors, who purchase an annuity, do so in order to earn a good return. Compared to other forms of savings, annuities offer guaranteed, lucrative returns. This is because annuities define an investment in the present that gives you a return of the same value in the future. They form a very useful vehicle of investment. Insurance providers, who sell annuities, sell them on the terms that you receive a guaranteed rate of return on the money that you have hoarded with them. This means, even if you have not paid the full amount of the annuity, you earn the contracted rate of interest on the money you have deposited with the insurance provider. Also, if you have started withdrawing money from the annuity, you keep earning the rate of interest on the money that remains with the insurance company.

An annuity is a contract between you and an insurance company to pay you the value of the money you invest in their annuity. This can be paid back at specified intervals, spreading over a long time, even till death. While this insures a regular flow of income, the most important advantage of an annuity is the return it gives. You can choose to receive a higher return from the annuity by selecting a variable or an equity-indexed annuity instead of a fixed one. The increased return is traded off with the risk element that comes with the annuity. To understand the risks and the guaranteed returns, it is important to understand how the types of annuities are defined.

Fixed Annuity:

A "fixed annuity" ensures a fixed rate of return on your money. The rate may be less if compared to other types of annuities; however, this form of annuity is the safest. Even during the period of saving the money for the annuity with the insurance provider, you earn the fixed rate of interest. Therefore, the amount of money that is with your insurance provider keeps growing at the fixed rate of interest mentioned in the annuity contract.

Since annuities come with the tax-deferred feature, you can pay back the tax for the money you invest in an annuity, at a later date. This means, you also earn the interest on the money that you would have paid to the government as taxes, if you had not purchased the annuity.

Variable Annuity:

If you buy a variable annuity, you earn a variable rate of interest. The market forces decide the rate of interest on this annuity because the money you invest is tagged with a portfolio of investment at the market rate. Naturally, the risk in these annuities is at the maximum.

Equity Indexed Annuity:

In an equity-indexed annuity the returns are variable as the annuity is linked with the stock market but the insurance provider guarantees a limit beyond which your returns will never fall. Hence, these are more secure than variable annuities.

Eventually, you gain more by investing in annuities. You simply shift the headache of investing your money for higher returns with the insurance provider. For more information or an expert advice on annuities, contact AnnuityLibrary.com




Curtis McDowell is a well known author who has been writing on Annuities for the website www.annuitylibrary.com for a long time.





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2012年9月22日 星期六

Benefits and Costs of a Variable Annuity


The new variable annuity has become a staple in many people's financial plan. The reason is the guarantees offered by the new variable annuity. The guarantees come in both living benefit and death benefit form. Living benefits offer guarantees to make certain the owner doesn't lose if the stock market or other investments drop below freezing. The death benefits guarantee the beneficiary a specific amount regardless of the stock market performance.

A variable annuity is nothing more than mutual funds with tax sheltering. What makes the new variable annuities so much different is that they include popular funds from a plethora of fund families and of course, contain guarantees no mutual fund can offer.

The tax sheltering of the mutual fund is a benefit for more than tax-free growth. If you own mutual funds and attempt to rebalance as the markets fluctuate, at each rebalancing you have a reportable tax incident. As anyone that actively manages their mutual fund portfolio can attest, it becomes a nightmare to track all the changes in a rapidly moving market. The tax sheltering of the annuity eliminates all the record keeping involved in mutual funds.

Variable annuities aren't all alike, however. Each of them has different surrender periods, charges, funds and guarantees. The interior charges on a variable annuity affect the investment return. The easiest method of finding the best variable annuity is to compare the rate that you'd receive if you invested into the product. Many of the companies offer hypotheticals based on past experience. While they aren't predictions of future returns, they do give you an idea of the policies with the best performing funds and lowest costs.

Variable annuities have guarantees on many products. The guarantees, known as living and death benefits, are different for every policy type. Some of the living benefits offer the guarantee that you'll never lose a penny of principal as long as you leave your funds in a specified length of time. The length of time varies from policy to policy and the some policies actually guarantee more than just the principal but also a specified return on your funds.

Other living benefits guarantee that if you take a specified percentage of income from your policy, you'll never run out of fund. Even if your real market value drops, the company has a second column that shows a guaranteed growth. If you withdraw five percent every year and the guarantee is five percent, even if the market drops ten percent every year, you'll still get five percent of the base amount until you die. If the market increases however, often these policies offer the right of resetting the base amount used to calculate the payment. Of course, if you access more than the five percent allowable, the guarantee cancels.

Death benefit guarantees are important also, particularly if the investments in the variable annuities are heavily loaded in the stock market during a volatile time. The principal may shift wildly as the market fluctuates, but the investor knows that his principal is safe and secure when he has a death benefit guarantee on the balance.

Variable annuities are wonderful retirement product but you need to know what you're buying before you dive in headfirst. It pays to decide what you need, compare annuities and seek the advice of a trained annuity specialist before you purchase any variable annuity.




Jonathan Tyler writes about investments for retirement including annuities insurance. Annuities can be a smart investment tool, but there are many different options to choose from, and few investors truly grasp how to properly assess the information available. If you would like to learn more about getting a variable annuity or the other types of retirement investments available, come see us at the above links.





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Different Types of Fixed Annuity and Its Benefits


Spiritual gurus may prophesy to live life in the moment but at times, it is very important to think about the future as well. And one of the most important aspects of future planning is financial planning. In the increasingly volatile world of today it is imperative that we have an assured source of income at retirement or when an economic calamity hits us.

For the daring investors, there is the stock market which can help you make quick money. But for the not-so-daring who are looking for a secure investment is a fixed annuity. This investment option basically gives you interest which is guaranteed by the insurance agency.

Fixed annuity is also at times referred to as tax deferred annuity. Reason being that it delays tax payments on your earnings until you withdraw money from it or start earning an income. This investment option is a great way to secure your retirement plans and gives you a steady flow of money.

A fixed annuity is of different types. They are:

· CD annuity - The certificate of deposit or CD annuity gives you a fixed rate of interest for a specified period of time. The interest rate does not change for the decided time period which is chosen by you at the time of setting up the annuity.

· Traditional Fixed Annuity - As the name suggests, this is the oldest and most popular kind of annuity. In this kind of annuity, the insurance company revises the rate of interest each year at the starting date of your annuity. But you can be rest assured that the revised interest rate would not be less than the minimum rate of interest guaranteed by the insurance company. The minimum rate of interest is clearly mentioned by the company at the time of fixing up your annuity. This kind of annuity is market linked and does have its pros and cons because at times of adverse economic conditions, the interest rate can be significantly lower than that in a CD annuity.

· Immediate Annuity - The name says it all. This kind of fixed annuity does not give you the benefit of tax deferral. Instead, it immediately starts giving you a steady flow of guaranteed income at the outset. This type of annuity is best suited for people who are nearing their retirement and do not sufficient time to build upon their resources with the help of tax deferral. Tax deferral annuities are meant for people who have a long way to go for retirement and can build a substantial reservoir of finances for their old age.

These are the different kinds of fixed annuities. But before you take a pick from the above, make sure that you consult some top notch financial planners to make an informed decision. Most of the times, insurance companies or banks would not tell you what is best for you. Hence, it is always wise to consult an expert before you decide to invest your hard earned money.

Click on the link below to learn more about a Fixed Annuity.




Visit http://www.annuitycampus.com for more Annuity and Life Insurance Tips and Tricks. Call Robert Eldridge directly at 800-643-7544. Robert Eldridge holds over a decade of experience as a multiline agent in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors.





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Retirement Annuity - Making After-Retirement Life Worth It


Retirement can be full of worries if one does not have enough funds to live rest of the life in a dignified way. For spending an anticipated after-retirement time it is important that you decide on Annuity options (better understood as pension plan) when we are in good working condition.

Annuities are available in several flavors and it has potential to become a lucrative investment vehicle for two basic reasons. The first reason being that the money you invest in annuities can be tax deferred. Secondly you are already preparing for retirement so that you don't have to worry later. These days, a large number of employers withheld a small amount from your weekly paycheck and invest it into an insurance product so that when you retire, it should be a relaxed phase of your life.

By investing in an annuity you pay a suitable amount to insurance companies through regular payments or so-called premiums. The insurance company invests this money in bond portfolios and stock as a result of which your money grows over a period of time exponentially. Since the money is invested in conservative portfolios, you remain protected from any kind of downfall in the stock market. When you receive a lump sum amount after you have retired, you do not only get the total of what you paid as premiums but an amount that would have grown exceptionally over these years.

Basically three kinds of annuities are available: deferred annuities, variable annuities and immediate annuities. All these different types have their own advantages and disadvantages and they should be selected depending on the income and tax goals in your mind.

Immediate annuities can be understood as a money management tool which allows you to invest a portion of your savings for monthly payments that you will receive either for rest of your life or for a specific period of time that you have decided. The only disadvantage with immediate annuity remains the fact that you cannot withdraw any cash in case of unforeseen emergency.

Deferred Annuities is one-up over immediate annuity because of the facts that the money that you plan to receive after retirement can be taken as a lump sum or as paycheck withdrawals. Variable annuities plans allow investment of your money in selection of portfolios. You can mix and match various annuities products and also receive tax benefit.




Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Personal Injury Settlements





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2012年9月21日 星期五

What to Consider When You Compare Annuities


Before you buy any financial product, it pays to shop around. This is also true of annuities. You should compare annuities, just as you would compare the rates and term of bank CDs. In today's competitive financial market, it pays to take a few minutes to get interest rate and benefit comparisons.

While rate comparisons for fixed annuities seems logical, if you buy a variable you should also compare annuities. Not all variable annuities are the same either. Of course, immediately you notice if there are different funds on the interior, but some of the other differences may not be as transparent.

Other differences on variable annuities are living benefits, death benefits, benefits charges, investment returns and free benefits such as automatic re-balancing. The living and death benefits of variable often sound the sound but many times, they are quite different. For instance. Some policies offer guarantee that you'll always receive your principal back if you leave your funds in a specific length of time. Others offer that same guarantee but they include a guarantee of growth every year besides. Some of the guarantees cost a fraction of a percent while others cost more.

In order to compare annuities, you need to know what you want your product to do. Of course, everyone wants 25 percent a year growth guaranteed but we all know that's no possible. You must look realistically at your situation and decide what's important to you.

If access to your funds is important, you need to have an annuity that allows you to remove a portion every year. Some annuities offer a ten percent cumulative withdrawal right. This is perfect for the person that worries they might need the funds. If you don't take the money out of some policies, the ten percent transfers to the next year making twenty percent available if you need it.

When you compare annuities, decide how long you're willing to tie up your money. Almost every annuity has a surrender period. The surrender periods vary from one year to longer. Some annuities, particularly those with a high up front bonus rate, have much longer and higher surrender periods and surrender fees. The surrender fee is the percentage of money you pay if you take your funds out too early.

Look for annuities that offer the longest rate guarantee if you select a fixed annuity. When you compare annuities and look at the rates, a high rate that lasts just one year may not be as good as a slightly lower rate that lasts several years.

No matter what type of annuity you select, know what options are the best for you and then look at those first when you compare annuities. Each person has different unique needs and desires. Knowing what you need is always the first step when you compare annuities.




Jonathan Tyler discusses and writes on the topics of annuity insurance and more generally offers advice on the topic of retirement. His writings attempt to be unbiased and straightforward, providing potential investors with applicable information. If you are looking to compare annuities or just looking for general information about your options, come visit us.





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How to Buy an Annuity


When you are on the verge of making a major financial decision, you must walk through the proper steps to make sure you avoid all risks. At Annuity Straight Talk, we have devised a basic strategy that will help an investor take all necessary steps to determine the best strategy for long-term financial stability and profitability. These steps are listed below.

Suitability- Is an annuity right for you? The suitability quiz on this site will help align your goals with the benefits of an annuity. We provide the straight talk and you set the standard. If our ideas meet your standards then further investigation of annuities is warranted.

Financial Review- You must review all of your financial assets and goals to determine what portion of your portfolio can be allocated if any to this type of investment. Things to consider:

Time Horizon- How much time do you have until you retire or will need your invested assets.

Current Asset Allocation- How are your current assets divided and does that adequately represent your needs and desires?

Goals- Do you need more growth, asset preservation or an income plan?

Strategic Positioning- Will an annuity provide for multiple uses in your financial future? The best products often do. Too many people have tunnel vision while saving for retirement and become limited as that day approaches. The distribution of assets is an art. Give yourself as much potential as possible by remembering these important facts.

Length of retirement... life expectancy- It's extremely important to make sure your assets last a lifetime and if at all possible increase to provide for adjustments to the cost of living.

Number of working years remaining- Are you still saving for retirement? Depending on how much time you have it may be a good idea to start drawing your retirement income picture now so you can fill in the gaps before it's too late.

Future cost of health/long term care- These costs will likely have a significant impact on your retirement years. Learn all you can now so you don't have to face this potential burden without being prepared.

Maintain growth throughout retirement- Have you explored a variety of strategies that will give you increased income when you need it most?

Navigate the maze of mandatory retirement plan distributions- This is self explanatory. Depending on your personal situation, mandatory withdrawals may or may not be a problem. It's best to figure it out now so the lack of planning doesn't unexpectedly alter a working retirement plan.

Product Selection- Which product offers you the best terms, flexibility and profitability? The annuity report will give you the tools to analyze all viable products. This is an essential step so you can make sure the insurance company and advisor are offering/recommending the right products.

Review and Implementation- Make a list and check it twice. Leave no question unanswered. Then, buy the annuity and relax knowing you have made a solid choice.

This approach will allow you to make an informed decision based on all factors unique to your personal financial life and tell you with certainty whether an annuity will help. It may or may not so you need to know that now before you get caught in a barrage of sales pitches.

Remember, in regards to make financial decisions, the only person you can trust is yourself. Tackle that responsibility with all the information and knowledge provided by Annuity Straight Talk. Trust, but verify.




Bryan J. Anderson
Annuity Expert at http://www.AnnuityStraightTalk.com
Unbiased Resources For Choosing Annuities





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Immediate Annuity


Immediate annuity is a type of annuity in which the contract owner starts getting payments after a single premium is paid. Payments can be made on a monthly, quarterly, annual or semi-annual basis. The rate of payment in immediate annuity is of two types, fixed rate and variable rate. The fixed rate guarantees a set income that will not fluctuate, whereas in variable rate payments will fluctuate according to the performance of selected investment the annuity is based on.

Immediate annuity is a vehicle for distributing savings with a tax deferred growth factor. Insurance company assumes the risk of the payouts lasting annuitants whole life in case of immediate annuity. Generally one can never outlive these payments and various choices are available for payment set up as well. There are some plans available which allows change in payment structure at a later date.

Immediate Annuity provides security and stability to its buyer by providing stable lifetime income or a guaranteed income for a specified period of time. It is simple and easily manageable because the annuitant does not need to manage his/her investments, watch markets, report interest or dividends. Immediate annuities provide quality return because insurance companies generally give higher interest rates on annuities than CD or treasury rates and also the principal is returned with each payment. We suggest you to select annuity product carefully according to your need due to the fact that most conventional immediate annuities cannot be revised or cashed in.

An immediate annuity can be purchased with funds from a variety of possible sources, such as: a maturing certificate of deposit, monies which have accumulated in a deferred annuity account; or funds from a tax-qualified defined benefit, 401k or IRA account. Under current tax law, a portion of each payment received from a non-qualified immediate annuity is tax free until your total premium is recovered. The remainder of each payment will be taxed as ordinary income in the year you receive it.




Nick Jameson is a well known author who writes on Immediate Annuities for the website fixedannuitylibrary.com





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2012年9月20日 星期四

Open The World Of Single Life Annuity To Yourself


Annuities can be described as a financial contract with insurance company that helps people save money for retirement. The money that are deposited into such provisions grow all the time, they are tax-deferred until they are withdrawn that happens generally after the person reaches retirement age. A fund that brings income to the person insured during retirement is called a single life annuity. The one who is insured is called annuitant. Further some information about annuities is provided to those, who search for such financial product.

Different payout options are available in single life annuities. In straight annuities, the money is paid out till the death of annuitant. There is also a possibility to purchase a refund option. According to this, after death of the annuitant, any remaining money in the account will be forwarded to beneficiary, whose name is stated in the contract.

There is an interesting option of these contracts called a guaranteed period or term. Guaranteed term ensures that payments will be made for stated number of years, despite if the annuitant is alive. If he or she will die till the end of guaranteed period, the payments will be made to estate of annuitant or their beneficiary, stated in the contract until the term comes to an end.

Interest earned with the funds is tax-deferred till the time the interest is withdrawn. In the USA, all annuitants that are below age fifty-nine and a half must also pay a penalty tax on funds, that are withdrawn from single life annuity. This penalty tax comes with income tax due on the withdrawal.

In the majority of the cases, a contract can be deferred or immediate. Deferred single life annuities are split into two distinct periods; known as the accumulation and payout phases. First, during the accumulation phase, the funds are deposited into the account where they earn interest over a number of years. After that, throughout the payout period, payments are received by the annuitant. These comprise the principle and accumulated interest earned over the period. The interest portion accumulated is taxed, in accordance with the annuitant's current tax rate.

When purchasing immediate annuities, the holder starts receiving payments from the first year of the contract. The remaining amount earns interest that is tax-deferred. Just like with deferred annuities, income tax on the interest is charged when the interest is withdrawn.

Joint and survivor annuities are more preferred for married couples than separate single life annuities. When purchasing joint annuities, both spouses will receive retirement income payments. Upon the death of the one spouse, the other will receive the remaining value. The payments will be made to surviving spouse during period, specified in the contract.

It can happen that income from an annuity is not needed during the retirement time. Then, couples can use the funds to buy a joint policy. These funds are also subject to income and penalty tax.

If further advice on any financial product is needed, including a single life annuity, it is strongly recommended to take appropriate legal advice. Before signing any agreements it is very important to check the credentials of the all parties involved.




Visit http://www.annuitycampus.com for more Annuity and Life Insurance Tips and Tricks!

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http://www.annuitycampus.com/understanding-annuities-newsletter.html

Call Robert Eldridge for Questions, Quotes, and a Free Consultation 1.800.643.7544 Ext. 1





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Only a Sucker Would Buy an Annuity


This was the statement made by a recent referral I received. I was not surprised with all the negative press surrounding this product owned my millions of Americans. But, I was interested in how my prospect came to this conclusion. I asked him to tell me what an annuity was in his opinion.  He said, 'An annuity is a product that pays you money every month, and when you die, the insurance company keeps the rest of your money.

 

 For a minute I thought he was talking about Social Security; currently scheduled to go broke in 2037 according to the Social Security Administration. Now think for a minute. If this were true, do you think millions of Americans would have placed hundreds of billions of their hard earned money into such a product. Americans bought $34.9 Billion in fixed annuities alone the first quarter of 2009 (1)

The answer is no.  Would almost every University, 501(c) 3, Church, and public school fund their retirement account with one?  Would Congress be considering giving a tax break to Americans who purchase an annuity for retirement if it were true? No. So what is an annuity?

First you must be aware that the "term" annuity is often confused for the "product" annuity. The term annuity means "a series of payments guaranteed for a specific or lifetime term of years in order to methodically liquidate a specific sum and provide guaranteed income for the contractually guaranteed term." The "product" annuity is a contract sold by an insurance company that provides a future promise to pay income benefits a contract owner cannot outlive. Growth occurs on a tax deferred basis and income is taxed as last-in first-out known as LIFO when withdrawn.   A 10% early withdrawal penalty may be applied to withdrawals made by a contract owner before the age of 59 1/2 unless owner uses provisions available under IRC Sec 72(t).  

This is why annuities are used predominately for a retirement vehicle. It is important to note that there is no additional tax advantage to owning an annuity in your IRA or retirement account since they are already tax deferred. It is not however inappropriate to own an annuity in your retirement account if safety of principle is importnt to you.  Many corporate pensions are partially funded with an annuity for that very reason. Fixed Annuities guarantee a fixed payment at liquidation while variable annuities do not. In a volatile interest rate or stock market environment, fixed payments make more sense to investors wanting to lock in a specific income stream that will not vary. Investors like annuities mainly for safety. There are several types of annuities and one must be sure of the specific form and uses of each.

Annuities come in 2 types -  Immediate and Deferred.

Each type offers 2 forms - Variable and Fixed

Fixed annuities come in 2 types-  Fixed Rate and Fixed Indexed- a hybrid product 

 

The deferred annuity is an accumulation vehicle with certain guarantees attached including the right to move your money after the surrender charge period is over. This period can be any where from 3 years to over 15 years. I don't see any real value in getting a contract over 10 or 12 years though unless you just want your agent to make more commission for a small increase in your product promises or benefits.

 

Immediate annuities provide "immediate" income for a fixed period or lifetime depending on the income needs of the client. Investors should be cautious buying one of these and make sure they understand all the rules including provisions that may be unpopular with their heirs. Immediate annuities can provide the highest income for the amount of money used and can be very suitable for income planning as long as the client has adequate money in other accounts or life insurance in place for the heirs.

 

Deferred annuities come as Variable accounts and Fixed accounts. On Variable Annuities, the income payment in the future would vary with the underlying investment performance of the sub accounts. It is one way of owning mutual funds with the goal to outperform fixed rate annuities and create a future income stream that may be higher than one provided by a fixed annuity with consistent annual performance at a lower rate. By assuming the risk of investment performance, a client may get lucky and do well with this arrangement. On the other hand, the market could react like the last 10 years and you have no growth at all or even lose money.  These products have several fees associated with them to provide certain guarantees. Investors who want protection from stock market risk may like the death benefit guarantees or income guarantees but these all come at a cost. 

 

Fixed Rate annuities usually provide a fixed multi year interest rate or a first year rate with a floating rate in future years. They operate in a similar fashion to a CD in that interest is credited daily or annually or other term, but taxes are deferred until earnings are withdrawn.  Annuities can be used to shelter interest income by retirees so they can avoid paying taxes on their social security income.

 

Fixed index annuities are hybrid products that credit interest based on the performance of an external stock market index. Interest credits can be no less than 0%, and many have an interest rate cap on the amount of interest that can be credited to the product in one year. The cap is one of the costs associated with principle protection.  Some are uncapped but have additional design features that limit the upside as well.  Index annuities have outperformed almost all alternatives that provide guarantees over the last 10 years and compared to the number of consumers that own them, complaints are surprisingly low.  Some of these products appear to be quite complex. And clients should stay away from any products that have surrender charges for more than 10 or 12 years. Even though most annuities have liquidity of 10%-15% of the account value annually, caution should be taken if an advisor suggests you put all of it into only one account.

 

Annuities provide some compelling reasons to own along with some reasons not to own. Once you have compared all the products available on the market that provide safety and a good rate of return, you may find that you may be happy to own one of the safest places in America to keep some of your money too.

 

(1) Beacon Research, Fixed Annuity Premium Study, May 27, 2009 as quoted by Globe Newswire




Robert B. Scott - email him at rbscott21@gmail.com /800-228-3454 Not available in all states, No investment, legal or accounting advice is being given with regard to this article. Please seek the counsel of your trusted advisor in these areas. Licensed in TN, MS, AL, VA and IA.

http://www.nationalfinancialservicesgroup.com





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