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  The interest growth inside an annuity is not taxable until withdrawn which results in a substantial accumulation advantage over other safe cash instruments.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Surrender Schedule- This refers to the length of time before all money can be withdrawn penalty free.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Free Withdrawals- All companies are required by law to allow a certain percentage of assets be withdrawn annually without penalty.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.



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Angela J. Brinker asked:


Annuities represent a form of payment, in which there are two sides involved and in which the payee will get a certain sum of money each year until all the money will be received and the contract will expire. The agreements for the annuity are made by individuals, companies or government agency in order to safely dispose of retirement income.

Thus, the annuities are a form of investing your money in; you can pay for them on the spot or you can wait until the investment matures. The proceeds you will make are subject to taxation and to having interest rates ,either fixed or  variable. Therefore, for those being on annuity plans and receiving money, the payments could be received in fixed premium shares or flexible premium shares.

In the current way, the payments come in different shapes and sizes, like the investment annuities, the structure settlements, the lottery payout or in the form of compensation for the workers. Like it was discussed earlier, you might need to wait a couple of years before you can receive payment and before the investment matures enough so that you can start earning money back.

Even so, there are numerous selling programs that offer attractive package  and the agencies offering the plans ensure that the clients will not have to wait too much for the annuity payment to come. The payment can start to be received immediately, without having to wait for the customer to reach the retirement age. Some private companies even tackle in buying investments as well. They have been working in the industry long enough as to inspire confidence. Therefore, these companies are experts in allowing customers to receive payment and they can be trusty worthy enough so that it is worth you invest and securely place your money in.

When approaching such companies in order to provide you guidance and assistance in making your investment, it is a good idea to go to a company that is known for the strong relationships it has had with the customers and with the clientèle. Remember that the money you have toiled long enough and hard on it is in the game so you don’t want to be making any foolish things with your money. Also, remember that you might be obliged to cash the annuities out so be careful when you decide on dealing with the company.

Once you have initiated contact with the company, you need to wait for their response. This response time can vary because the company might not have an immediate answer for your request. By the time they will reply back, it might be too late for you to receive the first payment and therefore, you need to plan accordingly. Typically, a company that respects itself will send you the response quickly enough but cases might vary in circumstances.

Selling the annuities and making other transactions with them is not on everybody’s mind. The agent you will deal with is advised to have some things done before. Things like signing papers and having a check back to you in return are normal things on the agenda. Also, remember that you will need to ensure some legalities are done in that you might need to become involved in doing paperwork so that everything will run smoothly with your payment. Moreover, you need to be aware and fully grasp the significance of all the papers you are signing, because remember it is your money that you are playing with right now.

If you find that the agent you have chose does not do much to help you get things done, then you should quickly switch sides before more damage is done. If you dispose of some extra time, just go and do it yourself and then look for someone else, really reliable that you can count on when dealing with your affairs. Thus, you will be able to see how things are doing and thus, you will not be fooled when dealing with the money that you have earned.

Not being taken as granted for things will ensure that you have understanding of how things are going on.



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Steve Lover asked:


There are many different types of annuities. There are situations that an annuity would be the right decision and there are situations that an annuity would be the wrong decision. Annuities can be very confusing. There are hundreds if not thousands of different annuities with different features and benefits. Before buying any annuity, make sure you get the answers to the following questions.

1. What company is it and what are their ratings?

An annuity is only backed by the quality of the company writing it. Find out the rating of the company and make sure it has a rating that you are comfortable with. Ratings go from AAA down. I suggest you stay with a company that is A rated or better.

2. What is the surrenders charge?

Annuities do not charge sales charges up front. Instead if you take the money out before a certain time you must pay a surrender charge. You must be very clear how much that charge is and for how long. The surrender charge is usually on a sliding scale, with the first year or two the highest percentage, then the rate lowers every year. Annuities that have over a 10% surrender charge and/or a charge that last for more than 10 years is often excessive. Make sure you know these numbers before you buy the annuity.

3. What are the penalty free withdrawal provisions?

Most annuities have a penalty free withdrawal. From my experience, the better companies usually have a 10% yearly penalty free withdrawal provision. That means that you can take up to 10% of your accumulated value (the money in the annuity) without having to pay a surrender fee. I have see onerous annuities that have only a 10% lifetime annuity. Find out what the penalty free withdrawal provision is before you buy the annuity.

4. Are there any other circumstances that would waive the surrender fee?

Some annuities have provisions that allow you to access your money with surrender charges for unemployment or nursing home. Find out what the provisions are in your annuity before the purchase.

5. How will I earn money in the annuity?

This is one of the trickiest parts of an annuity. A fixed annuity is pretty simple. You receive a fixed interest rate for the guaranteed period at which time it will adjust to the new fixed rate.

Equity Index Annuities are tied to the “Index” for examples the S&P 500 and a formula is used to calculate the gains. Make sure you understand the formula. It is really important that you understand how this product works if you plan on buying it. In specific ask about crediting method, participation rates and cap rates.

Variable annuities are linked to a managed portfolio and get credited the same way that any equity base product works similar to mutual funds.

6. Are there any limitations on what I can earn?

This is really very important for Equity Index Annuities that have caps on the amount that you can earn in one year and participation rates. Make sure you understand these before you buy.

7. How does the Death Benefit work?

If you die what happens to the annuity? Do your heirs have to annuitize and take their inheritance as a stream of income or can they receive the cash? If the annuity goes down does the death benefit still pay the higher amount. Find out the death benefit of the annuity.

8. Do I have to annuitize to gain the full benefit of the contract?

When you have passed the surrender period can you get the gains? Some companies force you to take your money as a stream of income. Make sure there are no strings at the end of the surrender charge.

9. Why is this strategy better for me than another one?

With so many annuities out there. Find out why your representative has picked this annuity. There are a lot of good answers. If you see a deer in the headlights look, you might want to continue shopping.

Annuities can be a great addition to a portfolio. They can create fantastic streams of income that a person can never outlive. Just make sure that the annuity is right for you.



cash for annuity

edward hulse asked:


The impact of reserves of a change in the interest assumption can be understood as if the rate of interest assumed in the reserve calculation is decreased, then it follows that there will be an increase in reserves. The rule, simply put, is that the smaller anticipated earnings must be offset by a larger reserve at any point in time. Remember, in calculating the present value of $X, the higher the interest rate assumed, the lower the present value of $X will be, all things taken into consideration.

What does this have to do with anything? If the interest rate – which undoubtedly will go no lower than it was during the first part of 2004 (no such thing as a negative interest rate) is what the insurer is getting on its investments – which consist primarily of the premiums received – then at time of claim since it did not make as much money on investing of the premiums as assumed in the premium and reserve calculations, the insurer would not be able to meet its financial projections, etc. Fortunately, interest assumptions on new business drops as the interest the company receives on its investments drops. Unfortunately, the company still has to pay the income promised under the policy, regardless of what their interest income had been during the accumulation period.

This simply means that an annuitant that took out a deferred annuity would still collect – as an example – $100 for every annual payment (premium) of $14 and change which was promised when the annuity was purchased some time back when interest rates were high. For another new annuitant, the premium for $100 for comparative coverage might be as high as $18. The offset, of course, is that the annuitant cannot put the same money into another investment and receive a much higher interest than what is received by the insurance company, who has the advantage of large portfolios professionally managed and therefore can get higher interest than Joe Lunchbucket.

Interestingly, the nation’s life and health insurers had a 310.8% jump in net income last year, earning $30 billion compared to $7.3 billion in 2002. The rebound in the equity market was responsible for the increase in earnings as insurance companies saw improvement on the sale of invested assets. Insurers had a $4.6 billion capital loss in 2003, compared to a $15.5 billion capital loss just a year earlier. Capital and surplus of the insurers had its largest increase in profits since 1997.

“The equity markets were much kinder to the industry in 2003, and we expect to see positive gains as 2004 progresses. Insurers didn’t need to dip into capital as much to absorb the higher losses and maintain reserves.” So, things are looking up!

ANNUITY NONFORFEITURE VALUES

Nonforfeiture values are understood by most as a life insurance policy function but it also applies in slightly different ways for an annuity. Basically, in life insurance it is a provision that the insured may receive the equity in some form, even if the policy is cancelled. For annuities, it is described as the vested benefit usually to a retirement plan participant and is enforceable against the plan.

It is of importance as the National Association of Insurance Commissioners (NAIC) promulgates “Model” legislation for the regulation of the insurance industry in the various states, and that is usually adopted by most, if not all, of the state insurance departments. Changes to the annuity nonforfeiture law were made in 2002 to address the reduction in interest rates in and after 2002, and a standard nonforfeiture law for deferred annuities was proposed by the NAIC. The change, which is temporary, would be from 3 percent to 1.5 percent to the minimum interest rate in the annuity nonforfeiture law, and which would be effective for 2 to 3 years (by state determination). When such provision “sunsets,” which would be sometime between July 2004 and July 2005, the minimum rate will be returned to 3 percent. (This may have happened at the time of the writing of this text, so it may have already expired in some states where it was enacted.)

The NAIC Model Standard Nonforfeiture Law for Individual Deferred Annuities proposes 6 principal changes:

1. (For deferred annuities) a minimum interest rate indexed to the five-year Constant Maturity Treasurer (CMT) rate, minus 1.25 percent. For equity-indexed plans, the minimum rate could be reduced by an additional 1 percent, but subject to guaranteed equity-indexed benefits of at least as great as the rate reduction.

2. The minimum interest rate will be the lesser of 3 percent or the rate determined by the 5-year CMT index, but it may never be less than 1 percent.

3. The interest rate can be redetermined at specific contract dates; the reset rate can be as of a single date or averaged over the most recent 15 months.

4. An annual charge of $50 can be recognized. No collection charge is allowed.

5. The net considerations are 87.5% for all products.

6. Premium tax can be reflected in the nonforfeiture law.

Every annuity issued must contain certain provisions :

1. When annuity premiums cease or when the annuity owner requests, the insurer must provide a paid-up annuity benefit.

2. If the annuity provides for lump-sum settlement when it matures – or at any other time – a cash surrender benefit in lieu of a paid-up annuity benefit. Payment may be deferred for no longer than 6 months with the permission of the Insurance Department.

3. The annuity must contain a statement of the mortality table and interest rates that are used in calculating minimum paid-up annuity benefits, cash surrender, or death benefits that are available under the annuity and any other information necessary to calculate these benefits.

4. The annuity must state that these benefits are equal to or more than the minimum benefits required by the state in which the annuity is delivered.

Regardless of these requirements, any deferred annuity may provide that if there have been no consideration received for a period of two years, and the present value of the annuity is less than $20 monthly, the present value of the annuity is determined according to the Code, and may be paid in cash.

For annuities issued before 1/1/04 and prior to 1/1/06, the California Insurance Code provides for minimum nonforfeiture values. For flexible contracts, the amount is specified by formula which assigns an interest rate of 3% for accumulations less withdrawals, indebtedness to the insurer plus additional amounts assigned by the insurer. The percentage of net consideration must be 65% for the first year and 87.5% for later years.

For fixed premium contracts, the portion of the net consideration is the same as for flexible contracts (65% and 87.5%). For single premium contracts, the minimum nonforfeiture amounts shall be defined as those with flexible considerations except the minimum nonforfeiture amount shall be equal to 90% ad the contract charge shall be $75.

For contracts issued on and after 1/1/06, the determination of the nonforfeiture values resembles the calculations shown above, but with annual contract charge of $50 (instead of $30) and the interest rate used in determining the nonforfeiture values will be 3% per annum. If the interest rate is offset, then the code requires a Constant Maturity Treasury Rate to be used for each redetermination date.

For equity indexed plans, provisions for determining the nonforfeiture values is stated in the Code. Each revaluation must show that each redetermination the additional reduction shall not exceed the market value of the benefit.

For a paid-up annuity, the benefit available under the annuity shall be the present value on annuitization which must be at least equal to minimum nonforfeiture on that date.

For a paid-up annuity which provides cash surrender benefits, the Code provides a (145 word) sentence outlining the cash surrender benefits available. Simply (very simply) put, the present value of future benefits less payments made on the annuity, would be the non-forfeiture amount, but the cash surrender benefit may not be less than the minimum nonforfeiture amount at that time. The death benefit must be at least equal to the cash surrender benefit.

For annuities that do not provide cash surrender values, the nonforfeiture amount shall not be less than the present value of the maturity value of the paid up benefit, adjusted by payments and obligations.

Not all annuities provide for cash surrender benefits or death benefits, and those plans must so state in a “prominent” place on the contact.

If a contract provides – by rider or otherwise – annuity benefits and life insurance benefits or a return of premium or gross considerations with interest, the minimum nonforfeiture values of the annuity portion will be calculated individually and then combined.



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Cash for Annuity

Alec Jordan asked:


The origin of settlement comes by the facing of any adversity which makes them crippled and jobless and put them on back foot. When circumstances strikes badly which shatter their life like a torn clothes and make them handicapped then at last, one agreement comes into existence  between victims and giver through lawsuits. The legal battle comes into light for the purposing of bestowing maximum acquisition to the beneficiaries who are standing on the bank of being at the bottom. There may be many modes such as personal injury, meet any accident etc.  The settlement will be disbursed in many ways such as monthly, quarterly, half yearly, annually, lump sum  etc.  Reimbursement which is paid to the deprived can be sold if they covet to sell, it is up to beneficiaries. Being recipients, they have right to utilize their fund every possible efforts. The sale needs to be permitted by state and federal laws even if their insurance policy contains anti assignments language. Sale will be tax free because this facility is bestowed by their court. Documentary work is finished by certified purchasers because they have received approval from the court under all at no cost to them. The transaction will be risk free because deal is being done under the hawk eyes of court. Amount will be wired into their account with in the next working day.  Preference should be given to the certified Purchase Settlement Payment for being prey by the fake purchasers who are out to out for the innocent customers. There are many sides which are there for giving their helping hand to the recipients with one motto to bestow utmost benefits to the needy and generates neck to neck competition among the buyers with the aim of reducing the discount rate thereby putting more money into their  wallet. Those companies offer different reimbursement solutions to assist them ut most. Choice is given to the sellers if they like to sell entire structured settlement or just part of their structured settlement. Structured settlement annuity buyers use numerous guidelines at the time of calculating the rate of interest. Market is flooded with many companies which are offering different kind of rat of interest such as 8%, 9%, 12% etc.  Sellers should opt according to their perception and should take all type of precautions for achieving more advantage.



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