Annuities - Part 5

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 [...]

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Posted by Bob Richards - October 27, 2008 at 9:41 am

Categories: annuity rates, fixed annnuities Tags: cd annuity, mutli-year guranatee

Pass-through Annuities Can Offer Competitive Returns

Many seniors purchase fixed annuities for potential safety, tax savings, and asset protection. In some cases, insurance companies will offer a higher interest rate for a limited time period to encourage those investments. But what happens after that time period ends? Other than the minimum rate guarantee, do you have any assurance that you will still get a good return? Pass-through annuities could possibly reduce that concern by limiting the amount of money the company makes on your investment. To achieve a basic understanding about how this works, let’s look at a hypothetical example (please note that this example is for illustration purposes only and is not based upon the performance of any particular annuity product). Say you bought a fixed annuity that had the traditional method of crediting interest. If the first year’s rate included a 5% bonus, plus the 3% minimum, you could be looking at 8%. And you might think that’s pretty good. Then year two rolls around and it’s time for rate renewal. The annuity company might only be contractually required to the minimum interest rate, even if they earned more than that on your premium payments. With a pass-through annuity you can potentially achieve a [...]

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Posted by Bob Richards - October 24, 2008 at 4:36 pm

Categories: fixed annnuities Tags: pass-through annuity

Index Annuity

When the markets are volatile and the interest rates low, investors turn to relative safer investment options such as an index annuity. Let us quickly try to understand the term and what are the advantages and disadvantages of investing in this kind of an investment vehicle. An Index annuity is an investment vehicle which is closely linked to some leading index such as the S&P 500. If the stocks rise then investors benefit from the rise in stock prices. If the stock markets fall, investors are safeguarded against the falling stocks which assure a minimum return of 3%. This is the biggest advantage of an index annuity. While on one hand an investor gains from rising stocks a falling market does not erode the base capital and still ensures a small return. Financial institutions which have annuity products make their money from the spreads. In a rising market they make more profits than what is passed down to the investor. The profits so accrued during a bull market are used to compensate investors during a bear phase. The index annuity is a relatively newer product in the annuity space. Earlier annuity products only varied around variable equities and fixed annuities [...]

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Posted by Bob Richards - October 23, 2008 at 10:26 am

Categories: equity indexed annuity Tags: index annuity

Fixed Immediate Annuities Can Offer Flexibility for Your Future

Stability and safety are important to many seniors, and these are only two of the reasons why immediate annuities are popular investments. A check arrives every month and part of the income is considered a tax-free return of your principal. As long as the 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). 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 future 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 annuity companies will let you take up to six payments at once. You would not, however, receive checks for the following six months (payments may [...]

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Posted by Bob Richards - October 22, 2008 at 10:03 am

Categories: fixed annnuities, immediate annuities Tags: fixed immediate annuities

Annuity Rates

An annuity is an investment which an individual makes to ensure a lifetime income. There are different types of annuities. These are Indexed annuity, variable annuity, fixed annuity, immediate annuity, deferred annuity and retirement annuity. Equity Indexed annuities grow depending upon the performance of an underlying stock market index. It is a good source of investment if the stock market is in an upward cycle. In an indexed annuity the principal is guaranteed and the profits are locked in. As a result investors do not lose their money. The annualized rate of return for these kinds of products can be anything between 5% to 9%. The best time to invest is when the stock market is depressed. A variable annuity allows an investor to grow investments in portfolios. This is one of the most preferred methods of annuity investments because the money is invested in conservative stocks and the payments are tax deferred. Investors can choose the method of payouts. The expected rate of return for variable annuity is 8% to 10% assuming equity accounts are selected. Fixed income annuities come with a time frame of 5 to 15 years. This type of annuity is more suited for conservative investors to ensure that [...]

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Posted by Bob Richards - October 22, 2008 at 9:56 am

Categories: annuity rates Tags: annuity basics, annuity rates, types of annuities

Annuity Companies

Anybody looking to invest in an annuity, be it an index linked annuity or otherwise, would be well advised to shop around before choosing which annuity company to place his or her investment with. The market is a thriving and busy area, and there are many hundreds of annuity companies to choose from, so how does one go about such an arduous and ultimately important task? How to choose Firstly, it is important that you know which type of annuity you require, what you expect to gain from the investment, and when. In many cases, those with private pensions will be contacted by their pension supplier once their pension kicks into action, or matures. It is always a worthy consideration to take out an annuity at this point – especially if one has retired earlier than the set age – as investing some of that pension can provide an ongoing extra income in later years. However, it is also important not to simply tick the ‘yes’ box on your pension providers’ mail, as they may not be the best available annuity for you. A quick search on an Internet search engine will produce a list of many providers of annuities, [...]

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Posted by Bob Richards - October 21, 2008 at 4:03 pm

Categories: buy annuity Tags: annuity companies

Market Value Adjusted Annuities

In the last 25 years, interest rates on retirement savings have fluctuated from 14% to less than 4%, and no one can really be sure what the future holds (you can get estimates using the annuity calculator). Sometimes this makes finding an investment that pays a steady income (which adjusts for rising and falling interest rates) a difficult chore. One method is to select investments with various maturity dates to lock in your money over a range of interest rates. This is typically done by laddering bonds. Long-term fixed investments usually pay a higher rate than short-term ones. However, as interest rates go up, it could be costly to liquidate long-term investments and reinvest the money at newer, higher rates. So how can you keep up with the best yields available while protecting your income against rate decreases? Market value adjusted annuities (MVAA) are fixed annuities that let you lock in interest rates for several terms that can range from one to 10 years. At the end of each term, the annuity company will present a new interest rate and offer you an opportunity to withdraw your money without surrender charges. But what if you wanted the money [...]

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Posted by Bob Richards - October 7, 2008 at 11:59 am

Categories: market value adjustment Tags: market value adusted annuity, MVA, MVAA

Annuity Table

While buying annuities, an investor should always check the annuity table. Annuity tables give a clear picture of how much annuity an investor can expect from the annuity provider after a certain number of years. As we know, annuities are investment instruments which are used by investors to secure their financial future after they retire. They are very important instruments and can either make or break an investor’s future after retirement. Let us see how we can best use annuity tables. These tables give graphical and tabular representation of returns based upon various factors such as demographics, amount of money to be invested and the expected return. There are various payment options that are offered by insurance companies and using an annuity table an investor can find out how much exactly one can earn in the different payment methods. It should be noted that an annuity table may not give the exact figure of how much return that one can expect from a product, but it will certainly help to form a rough idea and help the investor in taking a prudent investment decision. The annuity table that an investor uses should be current. An old version of an annuity [...]

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Posted by Bob Richards - October 2, 2008 at 8:33 am

Categories: annuity calculators Tags: annuity calculator, annuity table

Annuity Rate of Various Annuities

An annuity is an investment which an individual makes to grow principal and optionally insure a lifetime income. There are different types of annuities with different annuity rates. These are Indexed annuity, Variable annuity, Fixed annuity, Immediate Annuity, Deferred Annuity and Retirement annuity. Equity Indexed annuities grow depending upon a predetermined annuity rate or any stock market index. It is a good source of investment if the stock market is in an upward cycle. In an indexed annuity the principal is guaranteed and the profits are locked in. As a result investors do not lose their money. The annualized rate of return for these kinds of products can be anything between 4% to 9%. The annuity rate of return is typically higher than a traditional fixed annuity. A variable annuity allows an investor to grow investments in portfolios. The annuity rate of return is not fixed. This is one of the most preferred methods of annuity investments because the money is invested in conservative stocks and the payments are tax deferred. Investors can choose the method of payouts. The expected rate of return for variable annuity is 7%-10%. Fixed income annuities come with a time frame of 5 to 15 years. This [...]

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Posted by Bob Richards - September 30, 2008 at 3:22 pm

Categories: annuity rates Tags: annuity rates

Use an Annuity to Buy Long-Term Care Coverage

Long-term care insurance may be an important (even necessary) part of your financial plan. But you may be reluctant to buy a policy whose premiums can rise. Plus, if you never require long-term care, the money that you had spent on premiums simply vanishes. Still, you may want the financial security that long-term care insurance provides. There is another way to get long-term care coverage – by combining it with a life insurance or deferred annuity policy. These combination policies could make long-term care insurance more financially attractive. Here’s a brief summary about how they work. Long-term care insurance is added as a rider or as an additional benefit to a life insurance policy or deferred annuity contract. Premiums for many of the life/long-term care insurance combo policies are usually paid up front. While this can be a significant outlay of funds at the start of the policy, the one-time premium payment for both life and long-term care insurance does provide protection from rising long-term care insurance premiums down the road. In contrast to the life/long-term care policy, the long-term care coverage on a deferred annuity will typically be based upon a percentage of the annuity assets (based, among other [...]

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Posted by Bob Richards - September 29, 2008 at 12:52 pm

Categories: long term care Tags: annuity long term care