Understanding Annuities
Bryan J. Anderson asked:
What are annuities? Technical answers to simple questions make retirement planning situations more difficult than is necessary. Here is a straightforward guide to annuities and the use of such products in an optimal retirement plan.
An annuity is the safest way to invest money in an insurance company. Much like a CD at a bank, an annuity is a deposit of money. Annuities offer guaranteed return of principle and interest at a specified future date.
The settlement options refer to the choices an investor has for getting their money back. These options include lump sum or annual payment options. Annual income options can range from a specified period of years to a lifetime payout.
The main advantage annuities have over bank deposits is the deferral of taxes. The interest growth inside an annuity is not taxable until withdrawn which results in a substantial accumulation advantage over other safe cash instruments.
Annuities come in three major forms.
Fixed- The assets are subject to an annually declared interest rate with a base guarantee to ensure a certain level of growth over time. With a fixed annuity, the company bears all risk for the investment.
Variable- The assets are invested in a sub account that consists of several mutual funds. As the name implies, the account fluctuates with the market and the investor bears any risk associated with the investment.
Equity Indexed- This is a hybrid form of the first two product types. These annuities have a base rate guaranteed by the company but the investments are tied to a broad market index giving it the potential for considerable growth. This is a complicated product that demands a lot of scrutiny as an investor considers its use as a retirement investment vehicle.
Now, because there are three types of annuities offered by hundreds of companies, finding a suitable product can be complicated. There are several components to consider when grading different annuity products. Among these are:
Interest Rates- Current Rate, Guaranteed Minimum, Yield to Surrender
Surrender Schedule- This refers to the length of time before all money can be withdrawn penalty free. Certain income settlement options are available prior to the end of the surrender period.
Free Withdrawals- All companies are required by law to allow a certain percentage of assets be withdrawn annually without penalty. This is typically 10% but can be higher or lower depending on state law or individual contract.
Credit Rating- How stable is the company being considered? It is very important to only invest with companies that are very stable and have an excellent performance history.
Qualities that are unique to annuities make them extremely useful to the majority of retirement investors at some point. Safety, above average cash growth, tax deferral and guaranteed lifetime income are all reasons to consider an annuity.
Annuity Straight Talk was created to educate consumers about these valuable but complicated products. Decisions regarding retirement have serious implications and deserve serious attention. Every investor deserves the kind of objective analysis that AST provides.
Sell Structured Settlement
What are annuities? Technical answers to simple questions make retirement planning situations more difficult than is necessary. Here is a straightforward guide to annuities and the use of such products in an optimal retirement plan.
An annuity is the safest way to invest money in an insurance company. Much like a CD at a bank, an annuity is a deposit of money. Annuities offer guaranteed return of principle and interest at a specified future date.
The settlement options refer to the choices an investor has for getting their money back. These options include lump sum or annual payment options. Annual income options can range from a specified period of years to a lifetime payout.
The main advantage annuities have over bank deposits is the deferral of taxes. The interest growth inside an annuity is not taxable until withdrawn which results in a substantial accumulation advantage over other safe cash instruments.
Annuities come in three major forms.
Fixed- The assets are subject to an annually declared interest rate with a base guarantee to ensure a certain level of growth over time. With a fixed annuity, the company bears all risk for the investment.
Variable- The assets are invested in a sub account that consists of several mutual funds. As the name implies, the account fluctuates with the market and the investor bears any risk associated with the investment.
Equity Indexed- This is a hybrid form of the first two product types. These annuities have a base rate guaranteed by the company but the investments are tied to a broad market index giving it the potential for considerable growth. This is a complicated product that demands a lot of scrutiny as an investor considers its use as a retirement investment vehicle.
Now, because there are three types of annuities offered by hundreds of companies, finding a suitable product can be complicated. There are several components to consider when grading different annuity products. Among these are:
Interest Rates- Current Rate, Guaranteed Minimum, Yield to Surrender
Surrender Schedule- This refers to the length of time before all money can be withdrawn penalty free. Certain income settlement options are available prior to the end of the surrender period.
Free Withdrawals- All companies are required by law to allow a certain percentage of assets be withdrawn annually without penalty. This is typically 10% but can be higher or lower depending on state law or individual contract.
Credit Rating- How stable is the company being considered? It is very important to only invest with companies that are very stable and have an excellent performance history.
Qualities that are unique to annuities make them extremely useful to the majority of retirement investors at some point. Safety, above average cash growth, tax deferral and guaranteed lifetime income are all reasons to consider an annuity.
Annuity Straight Talk was created to educate consumers about these valuable but complicated products. Decisions regarding retirement have serious implications and deserve serious attention. Every investor deserves the kind of objective analysis that AST provides.
Sell Structured Settlement
