Annuities
Annuities Education Resource for Consumers

Fixed Immediate Annuity Can Eliminate the Required Minimum Distribution Calculation

Do you own an IRA, hold a Keogh, or still have assets in a qualified retirement plan that was offered by a previous employer? Then perhaps now you have to think about the best way to withdraw the funds, as the IRS requires at age 70½, while making sure that you don’t outlive your income. One choice is to remove the money all at once and pay the tax. That step, however, may put you in a higher tax bracket is is usually not wise. Another option is to go along with the government’s guidelines and calculate the Required Minimum Distribution that you must withdraw each year after you turn 70½. But what if there was a way to not have to do those calculations and also not worry about tax law changes and market fluctuations that could affect retirement accounts every year?   A tax-qualified, fixed immediate annuity will spread the tax liability over your projected lifetime and automatically satisfies the IRS requirements, so you will never have to calculate the required minimum distribution. A check will arrive every month, or whichever schedule you select, for the rest of your life—no matter how many years that might be (guarantee [...]

Read more...

64 comments - What do you think?
Posted by Bob Richards - November 7, 2008 at 11:20 am

Categories: fixed annnuities, immediate annuities   Tags: ,

Financial Worries? Some Solutions for Seniors

Do you find yourself worrying about your finances? While you may think of your situation as unique, you may in fact be among the majority of seniors wtih financial worries. A recent survey by the publishers of Senior Market Advisor Magazine revealed several seniors’ responses to the question “How much do you worry about money?” A little                           45% More than I should        27% A lot                              20% Keeps me up at night      5% Never                              3% Source: Senior Market Advisor, Senior Survey 2005 (July 2005) If the same poll were taken today, there would likely be many more who answer that financial worries are at the top of their worry list. Notwithstanding these statistical findings, financial worries do not have to control you.  A more secure retirement is possible, with smart and prudent financial planning solutions to these common retirement worries: Retirement Savings Shortfall Upon reaching retirement, some seniors are surprised to discover that their retirement savings will come up short–an obvious source of financial worry. Instead of pursuing leisure activities, they find that they must curtail their spending habits in order to make their savings last. However even in retirement, you can put your savings to work for you with [...]

Read more...

3 comments - What do you think?
Posted by Bob Richards - November 6, 2008 at 12:06 pm

Categories: immediate annuities, retirement income   Tags: , , , ,

Use a Split Annuity Strategy for More Income

As a retiree, you may have Social Security income and some pension income too. But you may want an additional but assured income to round out your financial planning for retirement. You have some investment money you can generate income with but you are leery of losing your principal because you may have to rely on that income for a long time.  What is an appropriate strategy for generating income but preserving your principal? You could use a certificate of deposit (CD). It is federally insured. The interest rate you will get depends on how long you tie up your money in the CD. A longer term CD typically produces a higher rate. CD’s are conservative securities representing the lower region of interest rate offerings. Nevertheless, at, say, 5% interest you can take $5,000 per year and preserve your $100,000 principal.  This interest income is fully taxed and you would be left $3,300 with under a 28% tax bracket. Let’s try a better strategy… A strategy that can give you more income–and will also tie your money up for while–uses a Split Annuity. Actually a Split Annuity is not an annuity policy. It is simply a combination of two annuity [...]

Read more...

1 comment - What do you think?
Posted by Bob Richards - November 5, 2008 at 10:20 am

Categories: retirement income, split annuity   Tags: ,

Indexed annuity

Not very long ago, investors had two options when it came to annuities. First one was variable annuity and the second one was fixed annuity. Thereafter a third type of annuity product was designed by annuity companies which is known as equity indexed annuity. An indexed annuity is designed to give a return which is close to important indices such as S&P 500 or the Russel 1000 Index.  Investors who have parked their funds in index annuities can indirectly participate in the markets. Let us find out some of the other features of Index annuities and also the genre of investors for whom this product will make a good fit. This product is definitely a good fit for investors who have a high risk appetite. Imagine this scenario. An investor who has invested in indexed annuities can expect a rate of return which is 50% to 60% of the underlying index. However, if the indices are not performing well then the investor’s rate of return for the annuity can take a serious hit. The factor known as “participation rate” specifies the level at which the index annuity owners will participate in gains in the index. Consider this example. If the participation [...]

Read more...

1 comment - What do you think?
Posted by Bob Richards - November 4, 2008 at 3:57 pm

Categories: index annuity   Tags:

Will a 1035 Exchange to Get a Better Retirement Annuity?

You can exchange one retirement annuity for another, but you as a retiree need to watch out for what you may lose in the process. Often when you have one investment and see a similar but better version of it, you wonder if you can ‘upgrade’ to the new and improved version. Generally, whenever you liquidate an investment or retirement annuity, you need to pay taxes on any gain. If you buy another investment, your cost of the new investment will be its tax basis until it is sold in the future to determine gain. However, in the case of two retirement annuities of ‘like kind’, the U.S. tax code, section 1035, allows you to simply exchange the two ‘like kind’ contrcats–if circumstances allow–so as not to have to pay tax until the latter investment is sold or pays out. In the case of retirement annuities, you need to be aware of what/how your ‘new and improved’ annuity may be different from your ‘old’ annuity. Section 1035 allows you to exchange an existing annuity contract for a new annuity contract without paying any tax on the income and investment gains in your current retirement annuity. These tax-free exchanges, known as [...]

Read more...

4 comments - What do you think?
Posted by Bob Richards - November 3, 2008 at 2:10 pm

Categories: 1035 exchange, retirement income   Tags:

What’s the “Real” Fixed Annuity Rate?

Annuity rates can often change in tandem with the rates paid on other fixed interest investments. However, whenever rates drop, the real return on annuities could potentially be higher than other interest-paying assets. First of all, fixed deferred annuities typically promise a minimum rate of return for the term of the contract. For example, if you select a fixed annuitythat locks in current rates for five years, you will earn a competitive rate for the first five contract years.  After that, you will receive no less than the minimum rate, regardless of how low market rates might possibly go.  Such an annuity is called a multi-year guarantee annuity. Second, annuities are tax-deferred investments. That means the earnings on your annuity’s principal will compound without you owing current taxes. Other fixed income investments, such as CDs, are taxed as interest is credited (of course, CDs are FDIC insured for up to $250,000 per account per beneficiary through 12/31/09). Even if you reinvest the interest, you have to pay income tax. This reduces the effective rate of return on your taxable fixed interest investments. Please note, however, that annuities are designed for long-term investing and ordinary federal income taxes and a 10% tax [...]

Read more...

6 comments - What do you think?
Posted by Bob Richards - October 31, 2008 at 5:18 pm

Categories: annuity rates   Tags:

Mistakes in Titling Annuities Could Have Undesirable Results

There’s more to retirement than managing assets; you must also ensure that those assets are titled correctly. Not doing so, particularly in regard to annuities, can have major implications for you and your loved ones. Let’s say you decide to invest move some of your assets from a mutual fund to an annuity because you want your beneficiaries—your children—to receive the annuity death benefit. The chart below illustrates. Sample titling of an Annuity vs. Mutual fund:   Mutual fund Title of account Joint owners: John and Jane Doe, joint tenants with right of survivorship (JTWROS) Event John Doe’s death Asset distribution Jane Doe, as joint tenant, controls the assets in the mutual fund   Annuity Title of account Joint owners: John and Jane Doe Annuitant: John Doe Beneficiaries: Sam and Sarah Doe Event John Doe’s death Asset distribution As beneficiaries, Sam and Sarah Doe receive the annuity death benefit This seems simple enough but not so fast. Mis-titling the annuity could potentially result in an unexpected payout with undesirable tax consequences. Here’s how. Again, John and Jane Doe are the owners of the annuity. If John Doe dies, the annuity would in all likelihood pay out to the beneficiaries, the [...]

Read more...

5 comments - What do you think?
Posted by Bob Richards - October 30, 2008 at 12:07 pm

Categories: annuity titling   Tags: ,

I Don’t Want an Deferred Annuity Because I Can’t Get My Money Out

Retirees often want to know how quickly they can get to their money in case they need to cover extraordinary expenses such as a medical emergency, or a home or auto repair. This need for liquidity may cause them to avoid deferred annuities. However, when you look closely, you’ll see that annuities can possibly provide access to funds that can accommodate many circumstances. For instance, what if you need to take out money before the deferred annuity matures?  Most companies will let you remove a portion of your account’s value each year without paying a withdrawal charge. This is usually 10%, and once the surrender charge period expires, you’ll be able to withdraw as much as you want without paying any penalties to the issuer. But annuities also can allow for other circumstances. Suppose you are worried about money for future long-term care or a medical emergency? Some annuity companies will give you penalty-free access to your funds if you have to go to a nursing home or come down with a critical illness.  And what about income from your deferred annuity?  If you reinvest, the income is not reported on your tax retyrn and in fact, may help lower the tax [...]

Read more...

2 comments - What do you think?
Posted by Bob Richards - October 29, 2008 at 6:38 pm

Categories: annuity liquidity, deferred annuities   Tags:

Javelin Marketing: Immediate Annuity Revamped for Modern Times

The word “annuity” brings to mind different meanings for many investors.  That’s because there are different types of annuities designed for different purposes.  One of these is the immediate fixed annuity, which can provide an immediate stream of cash payments over a lifetime or a defined period of time. If the investor has chosen a lifetime payout retirement option, he or she typically pays a single premium to an annuity company. In return, the company agrees to pay the investor regular and ongoing cash payments for life, or for a lesser amount to continue over the life of both spouses. Although many investors choose to receive monthly payments, it is also possible to receive quarterly, semi-annual, or annual payments as well. Assuming the payments are structured over a lifetime, the investor is provided with a lifetime income he or she cannot outlive. Such an investment is useful for investors requiring additional retirement income, for support of a community spouse in the event the other spouse is in need of nursing-home care and is seeking to qualify for Medicaid (immediate annuities can be treated as exempt asset in some states), for making lifetime payments to cover long term care needs, or [...]

Read more...

68 comments - What do you think?
Posted by Bob Richards - October 28, 2008 at 1:02 pm

Categories: immediate annuities, life annuity   Tags: ,

Seniors Can Protect themselves from Declining Short Term Rates

Fixed annuities can be popular among seniors. They are easy to buy, you know exactly how long you must tie up your money, and the IRS will let you defer the income tax on the earnings.  But one point that may have stopped you from investing in an annuity is that some traditional fixed annuities do not lock in the interest rate for the duration of the contract. This means that after the initial period, which is typically one year, the return that the annuity company pays could possibly go higher or lower each year thereafter. However, there is a type of annuity that fixes the return for the entire contract’s term. This way you will know exactly how much you’ll earn while you own the contract–see the fixed annuity calculator for a projection.   CD-annuities (also known as multi-year guarantee annuities) provide level interest rates for the entire term so you won’t get any surprise notices during this time. You select the term, which generally ranges from three to ten years when you make the investment. At the end of the term, you will usually have a 30-day window to withdraw all or part of your money, or renew the contract [...]

Read more...

2 comments - What do you think?
Posted by Bob Richards - October 27, 2008 at 9:41 am

Categories: annuity rates, fixed annnuities   Tags: ,

« Previous Page — Next Page »