Ladder Annuities for Control over Interest Rate Fluctuations
One major advantage of an immediate fixed annuity is the security of a guaranteed income. You can count on those regular monthly payments. If returns on other investments diminish–because of a fall in interest rates or a stock market slump–your annuity payments remain steady. Offsetting this advantage is if interest rates are down when you purchase your annuity, your monthly payments will be less and may not keep up as easily with inflation. Is there a way to offset this situation? First, realize that once your immediate annuity begins, it is irrevocable. You cannot change your mind; there’s no lump-sum repayment provision (there are a few companies that offer commutation–the ability to get your principal back at a discount). So, shop for the best deal when you buy. The amount of your monthly annuity check is based on the size of your investment, your age, and what the insurance company estimates it will earn on their contract with you. But realize, too, that the monthly payment on the same size investment can vary significantly from company to company. Get several different proposals to ensure you are getting a good deal. Do not let anyone rush you into making a purchase. The consequences [...]
Categories: annuity ladder, immediate annuities Tags: annuity ladder, laddering annuities
Annuity Rates Can be Different When Renewal Rates are Declared
Perhaps you are considering investing in a deferred annuity to use later in your retirement as a form of longevity insurance. You may want to look into the annuity company’s annuity rate renewal history to make your choice. Two seemingly identical deferred annuities can offer you the same terms but may produce decidedly different annuity rates at renewal time. Let’s see why. A deferred annuity comes under jurisdiction of your state’s department of insurance unlike their variable versions. This limits the annuity company’s investment options to support its deferred annuity offers for the assurance that such an insurance product will give. Regulations require most of its investments to be in bonds. Exploring your potential deferred annuity choices, you may find two companies offering an attractive deferred annuity with the same terms. Each annuity has the same initial annuity rate, the same minimum annuity rate guarantee, the same surrender charge, and lastly the same withdrawal features. But, of course, after the initial annuity rate time has expired, each company will substitute a renewal rate according to its own investment discretion. What determines that?| The earnings from an annuity company’s portfolio depends on the mix of investments (mostly bonds but also mortgages and real property) on the [...]
Categories: deferred annuities Tags: annuity rates, deferred annuity, renewal rate
Fixed Annuities Tailored for Seniors
Retirees want to secure their future financial status. Fixed annuities can play a big part. Let’s consider how fixed annuities can help individuals and families create a future supplemental retirement income. While fixed annuities provide several benefits in the form of increased rate of growth in savings through tax-deferred growth, competitive returns, and security (through various guarantees) they also offer another important benefit– insurance against financial instability. You can invest as much as you want in a fixed annuity, leave it there to grow as per the rate of interest promised to you, and withdraw money when you need it. Lastly, you have several choices about how and when to withdraw your money. Here are several benefits that contribute to stability: 1. A fixed annuity is often an appropriate choice for seniors because it offers the promise of a steady income when annuitized. Buy ‘term certain’ fixed annuities if you want to collect income over a particular time period only. Or buy a life annuity if you want to receive income for your entire life. 2. Several fixed annuities offer special features that can be useful for seniors. You can receive systematic or flexible withdrawals. This gives you the freedom and [...]
Categories: fixed annnuities Tags: fixed annuities, seniors
Qualified versus Nonqualified Annuities – Which Suits You?
Qualified deferred annuities carry significantly different contribution, withdrawal, and tax regulations compared to non-qualified deferred annuities. Know these differences to choose which type you should use. Annuity Nonqualified Qualified Tax-deferred earnings Yes Yes Early withdrawal penalty (10% IRS) Yes Yes Contribute with pre-tax dollars No Yes Contribution based on ‘work’ earnings No yes Yearly contribution limits No Yes Accept direct rollover from qualified plan No Yes Withdrawal requirements No, or much later MRD at 70½ An deferred annuity is a contract you make with an insurance company to grow your principal and then if you choose, to receive as series of payments–usually for life –in return for your ‘premium’ contributions. You can purchase either a fixed deferred annuity or a variable deferred annuity. An deferred annuity has two phases: accumulation and annuitization. During the accumulation phase, you contribute premiums that are invested for growth. You receive your series of payments during the annuitization phase (you may also choose to make your withdraw in a lump sum). Nonqualified Deferred Annuities Earnings within a deferred annuity–like those of a life insurance contract–are not taxed as long as they stay in the deferred annuity. Taxes on these earnings are deferred until they are [...]
Categories: deferred annuities Tags: deferred annuity, nonqualified annuity, qualified annuity
What is Medicaid Annuity?
There is no such thing as a Medicaid annuity. Annuities can however help some people shelter assets so that they can qualify for Medicaid long term care benefits. The reader is encouraged to consult an elder care attorney to understand the laws that apply in his state. Medicaid rules vary from state to state, so the following discussion is a general discussion of federal rules that impact the use of annuities for Medicaid planning. Some retirees have concern about paying for ill health (long term care) in later years. One strategy is to exhaust one’s assets and then qualify for Medicaid support. Understandably, most people are not eager to exhaust their assets. When it comes to counting your assets to determine Medicaid qualification for long term care benefits, properly structured annuities may be an exempt or non-countable asset and can be retained by the person who also gains Medicaid benefits. But that annuity must meet the following criteria: 1. It must be an immediate annuity or deferred annuity that is now being annuitized 2. The guaranteed payments must be for the life of the owner, or term certain shorter than the owner’s life expectancy Annuity agents often refer to annuities that meet the above [...]
Categories: Medicaid annuity Tags: Medicaid annuity, Medicaid eligibility
Immediate Annuities – a retirement income tool
Stability and safety are important to many seniors, and these are only two of the reasons why immediate annuities are popular retirement income choices. A check arrives every month and part of the annuity income is considered a tax-free return of your principal. As long as the immediate annuity company is financially sound, the payments will continue for the life of the contract (annuities are guaranteed by the claims-paying ability of the issuing company). You can get an estimate of monthly income using the immediate annuity calculator. However, consumers sometimes believe that immediate annuities are illiquid, irreversible investments, and cannot provide for future lifestyle changes. Nonetheless, there are some immediate annuities with options that may add flexibility to your financial plan. Immediate annuities can possibly include an option that would allow you to receive extra cash at specific anniversary dates. For example, this might be at the 5th, 10th, or 15th anniversary of your investment. Exercising this option will reduce your current payments (the distribution may be fully taxable, so consult with your tax professional). Suppose you needed money to cover an emergency, like paying for caregivers or a home repair. Some immediate annuity companies will let you take up to [...]
Categories: immediate annuities, retirement income Tags: immediate annuities, immediate annuity, lifetime income
