Archive for December, 2008
Annuities Vs Cds
Steven Hart asked:
When it comes to choice of low risk investments that offer a reasonable return, many people find themselves torn between annuities and CDs.
Annuities are financial products, mostly offered by insurance companies, in which the person taking the annuity gives the company offering the annuities a payment (annuity premium), which is invested by the annuity company, guaranteeing the annuity holder an assured flow of income for a lifetime or up to a pre-agreed annuity expiry date. In some types of annuities, the annuity holder makes regular periodical payments to the annuity company, which the company invests on their behalf, and pays the annuity holder a lump-sum payment upon the maturity of the annuity.
On the other hand, CDs (Certificates of Deposit) are a form of time deposit, that is, financial arrangements in which the CD holder deposits an amount of money with a financial institution for a fixed period of time at whose end he withdraws the amount he invested plus the interest (usually pre-agreed) it has earned. The earnings on CDs are typically significantly higher than on usual savings, which can be withdrawn on demand.
As investment options, both annuities and CDs have their unique advantages and disadvantages.
The main advantage that annuities have over CDs is that annuities typically offer higher returns than CDs. Moreover, some of the guarantees available to annuity holders (like the guarantee of a steady stream of income for a lifetime) are not be available to CD holders. The downside of annuities is their relatively higher risk, at least when compared to CDs. As it were, in most cases the guarantees behind annuities are just backed by the strength of the company offering them, and if the company goes under (which is a real possibility in the current recession), the money annuity holders had put into their annuities also go down with it.
Turning to CDs, the main advantage that CDs have over annuities is the fact that they offer a lower risk than annuities. This is because, legally speaking, CDs are treated as savings whereas annuities are considered to be investments. Consequently, CDs (being savings) benefit from federal deposit insurance which annuities (being investments) don’t benefit from. On the downside though, the returns on CDs tend to be lower than returns on annuities. Moreover, if one opts to cash a CD before its maturity, they are often subject to penalties which can amount to quite significant figures, although most annuities also do charge a ‘surrender fee’ if the annuity holder opts to prematurely exit from the annuity agreement.
PurchaseStructuredSettlements-1st.info
When it comes to choice of low risk investments that offer a reasonable return, many people find themselves torn between annuities and CDs.
Annuities are financial products, mostly offered by insurance companies, in which the person taking the annuity gives the company offering the annuities a payment (annuity premium), which is invested by the annuity company, guaranteeing the annuity holder an assured flow of income for a lifetime or up to a pre-agreed annuity expiry date. In some types of annuities, the annuity holder makes regular periodical payments to the annuity company, which the company invests on their behalf, and pays the annuity holder a lump-sum payment upon the maturity of the annuity.
On the other hand, CDs (Certificates of Deposit) are a form of time deposit, that is, financial arrangements in which the CD holder deposits an amount of money with a financial institution for a fixed period of time at whose end he withdraws the amount he invested plus the interest (usually pre-agreed) it has earned. The earnings on CDs are typically significantly higher than on usual savings, which can be withdrawn on demand.
As investment options, both annuities and CDs have their unique advantages and disadvantages.
The main advantage that annuities have over CDs is that annuities typically offer higher returns than CDs. Moreover, some of the guarantees available to annuity holders (like the guarantee of a steady stream of income for a lifetime) are not be available to CD holders. The downside of annuities is their relatively higher risk, at least when compared to CDs. As it were, in most cases the guarantees behind annuities are just backed by the strength of the company offering them, and if the company goes under (which is a real possibility in the current recession), the money annuity holders had put into their annuities also go down with it.
Turning to CDs, the main advantage that CDs have over annuities is the fact that they offer a lower risk than annuities. This is because, legally speaking, CDs are treated as savings whereas annuities are considered to be investments. Consequently, CDs (being savings) benefit from federal deposit insurance which annuities (being investments) don’t benefit from. On the downside though, the returns on CDs tend to be lower than returns on annuities. Moreover, if one opts to cash a CD before its maturity, they are often subject to penalties which can amount to quite significant figures, although most annuities also do charge a ‘surrender fee’ if the annuity holder opts to prematurely exit from the annuity agreement.
PurchaseStructuredSettlements-1st.info
Benefits Of Investing In Annuities
Jizmack Baraceros asked:
There are two reasons why people invest in annuities. Either they want to receive cash on a monthly basis for ‘additional’ income or to allow the money to grow tax-deferred to create a fund that could finance a good retirement. An annuity is an asset management tool that lets you form a fund. A contract will be made once you apply for annuity. Under this contract, you agree to make a series of payments and in return, your insurer agrees to pay you periodically beginning either immediately or at some date in the future, depending on the type of annuity you chose to pursue.
There are a wide variety of annuity contracts that you can choose from. Similarly, no matter what kind of financial goal you have, you will find a form of annuity strategy that fits with it; there are immediate annuities, split annuities, tax-deferred annuities, college annuities and charitable gift annuities.
Among all these strategies, the split annuity has been said to be the best. Split annuity is a strategy that combines deferred annuity with immediate annuity. Proven to be very tax efficient and effective, split annuities utilize both these types of annuity to keep an individual fully rewarded during and after the agreed upon time frame — by adapting split annuity, you will be using an annuity policy designed to generate a monthly income and another that will restore your original principal at the end of the time period you have chosen.
But take note that while it is true that investing in split annuities (or any other annuity) promises large returns in the future, dealing with them is rather complicated. Contracts concerning annuity carry lots of complexities and those who did not make the effort to understand them end up getting nowhere. That having said, to be able to reap all the benefits of investing in annuities, researching can help a lot.
For more information and tips on Benefits Of Investing In Annuities visit, http://splitannuities.com
Purchase Structured Settlement
There are two reasons why people invest in annuities. Either they want to receive cash on a monthly basis for ‘additional’ income or to allow the money to grow tax-deferred to create a fund that could finance a good retirement. An annuity is an asset management tool that lets you form a fund. A contract will be made once you apply for annuity. Under this contract, you agree to make a series of payments and in return, your insurer agrees to pay you periodically beginning either immediately or at some date in the future, depending on the type of annuity you chose to pursue.
There are a wide variety of annuity contracts that you can choose from. Similarly, no matter what kind of financial goal you have, you will find a form of annuity strategy that fits with it; there are immediate annuities, split annuities, tax-deferred annuities, college annuities and charitable gift annuities.
Among all these strategies, the split annuity has been said to be the best. Split annuity is a strategy that combines deferred annuity with immediate annuity. Proven to be very tax efficient and effective, split annuities utilize both these types of annuity to keep an individual fully rewarded during and after the agreed upon time frame — by adapting split annuity, you will be using an annuity policy designed to generate a monthly income and another that will restore your original principal at the end of the time period you have chosen.
But take note that while it is true that investing in split annuities (or any other annuity) promises large returns in the future, dealing with them is rather complicated. Contracts concerning annuity carry lots of complexities and those who did not make the effort to understand them end up getting nowhere. That having said, to be able to reap all the benefits of investing in annuities, researching can help a lot.
For more information and tips on Benefits Of Investing In Annuities visit, http://splitannuities.com
Purchase Structured Settlement
Insurance Education – How Are Annuities Paid?
edward hulse asked:
Single Premium immediate annuity premiums are paid when the contract is signed, hence the term “lump sum payments.” The funds for the payment of premiums can come from a variety of sources such as Employee profit-sharing plan, Savings Accounts, Cash Value of life insurance policy or sale of home or property, etc.
In today’s market, many annuities are purchased as the result of an IRA, 401(k) or 403(b) rollover. When this is done, it is extremely important that it be a “Section 1035″ exchange, i.e. that it not be a taxable exchange unless, for some reason, the customer wants to pay taxes on the amount of the rollover at that time. The insurance company will furnish the papers that must be executed for such a rollover to exist and as discussed elsewhere in this text, the funds must be automatically transferred to the new annuity.
Periodic Level Premiums is a typical payment method of deferred annuities. The annuitant pays equal premium amounts at regular intervals, until the benefits are scheduled to begin. Some individuals choose this option as it is similar to making deposits into a regular savings type account.
Periodic Flexible Premiums is a premium payment method that is more “in tune” with today’s investment world. The annuitant pays the premiums over a period of time, until they are paid off. Since the premiums are flexible, they appeal to those who want flexibility in the timing and amount of premium payments and are particularly attractive to those who want a program in which they can vary the amounts they save each year. This also appeals to those who earn commissions, or other types of irregular income such as actors, fruit-truck drivers, artists, etc., not to mention families with growing children. As long as the annuity remains in effect, funds will continue to accrue interest. The principal disadvantage is that the actual amount of annuity benefit cannot be determined in advance, which may be essential in financial planning.
MAXIMUM PREMIUM ALLOWED TO BE COLLECTED
Insurance companies that issue annuities are restricted as to the amount of premiums paid in advance that they are allowed to collect. This is important inasmuch as Variable Annuities, and to some extent, Equity Indexed Annuities, allow other than fixed payments. Obviously, in order for the insurance system to work, an insurer may accept such funds, but the funds may not exceed the sum of future unpaid premiums on any policy or the sum of 10 such future unpaid annual premiums if such sum is les than the sum of future unpaid premiums. These regulations do not disallow the rights of an insurer to accept funds when there is an agreement that such accumulation of funds will be used for purchasing annuities at a future date.
HOW LONG WILL BENEFIT PAYMENTS CONTINUE?
ANNUITY CERTAIN (PERIOD CERTAIN)
An Annuity Certain specifies the number of benefits payments of a set amount. This option will guarantee a minimum amount that the insurance company will pay on an annuity. The annuity has a Death Benefit that provides for payment to be made to the designated beneficiary upon the annuitant’s death and will continue as long as the beneficiary lives. In effect, this annuity says that it will pay the benefits remaining of the period certain to the beneficiary. However, if the annuitant should survive the period certain, then the annuity performs as a Life Annuity.
.
CONSUMER APPLICATION
Cecil dies 3 years after taking out an Annuity with a 5-year period certain. The Annuity Company will continue to make payments to his beneficiary for next two years. Insurance companies usually pay the present value of the remaining payments in a lump sum, so Cecil’s beneficiary will receive 2 annual payments.
If Cecil had survived the first five years of annuitization (liquidation period), the annuity would have continued to be paid out in the normal manner, ceasing upon the annuitant’s death.
http://myceisonline.com
PurchaseStructuredSettlements-1st.info
Single Premium immediate annuity premiums are paid when the contract is signed, hence the term “lump sum payments.” The funds for the payment of premiums can come from a variety of sources such as Employee profit-sharing plan, Savings Accounts, Cash Value of life insurance policy or sale of home or property, etc.
In today’s market, many annuities are purchased as the result of an IRA, 401(k) or 403(b) rollover. When this is done, it is extremely important that it be a “Section 1035″ exchange, i.e. that it not be a taxable exchange unless, for some reason, the customer wants to pay taxes on the amount of the rollover at that time. The insurance company will furnish the papers that must be executed for such a rollover to exist and as discussed elsewhere in this text, the funds must be automatically transferred to the new annuity.
Periodic Level Premiums is a typical payment method of deferred annuities. The annuitant pays equal premium amounts at regular intervals, until the benefits are scheduled to begin. Some individuals choose this option as it is similar to making deposits into a regular savings type account.
Periodic Flexible Premiums is a premium payment method that is more “in tune” with today’s investment world. The annuitant pays the premiums over a period of time, until they are paid off. Since the premiums are flexible, they appeal to those who want flexibility in the timing and amount of premium payments and are particularly attractive to those who want a program in which they can vary the amounts they save each year. This also appeals to those who earn commissions, or other types of irregular income such as actors, fruit-truck drivers, artists, etc., not to mention families with growing children. As long as the annuity remains in effect, funds will continue to accrue interest. The principal disadvantage is that the actual amount of annuity benefit cannot be determined in advance, which may be essential in financial planning.
MAXIMUM PREMIUM ALLOWED TO BE COLLECTED
Insurance companies that issue annuities are restricted as to the amount of premiums paid in advance that they are allowed to collect. This is important inasmuch as Variable Annuities, and to some extent, Equity Indexed Annuities, allow other than fixed payments. Obviously, in order for the insurance system to work, an insurer may accept such funds, but the funds may not exceed the sum of future unpaid premiums on any policy or the sum of 10 such future unpaid annual premiums if such sum is les than the sum of future unpaid premiums. These regulations do not disallow the rights of an insurer to accept funds when there is an agreement that such accumulation of funds will be used for purchasing annuities at a future date.
HOW LONG WILL BENEFIT PAYMENTS CONTINUE?
ANNUITY CERTAIN (PERIOD CERTAIN)
An Annuity Certain specifies the number of benefits payments of a set amount. This option will guarantee a minimum amount that the insurance company will pay on an annuity. The annuity has a Death Benefit that provides for payment to be made to the designated beneficiary upon the annuitant’s death and will continue as long as the beneficiary lives. In effect, this annuity says that it will pay the benefits remaining of the period certain to the beneficiary. However, if the annuitant should survive the period certain, then the annuity performs as a Life Annuity.
.
CONSUMER APPLICATION
Cecil dies 3 years after taking out an Annuity with a 5-year period certain. The Annuity Company will continue to make payments to his beneficiary for next two years. Insurance companies usually pay the present value of the remaining payments in a lump sum, so Cecil’s beneficiary will receive 2 annual payments.
If Cecil had survived the first five years of annuitization (liquidation period), the annuity would have continued to be paid out in the normal manner, ceasing upon the annuitant’s death.
http://myceisonline.com
PurchaseStructuredSettlements-1st.info