Tag Archives: Annuity

Before You Purchase An Annuity – Vital Information To Know

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Read this before purchasing an annuity.

Purchasing an annuity is a major financial commitment. When you sign the contract it is almost like buying a house. Be sure to understand what you are getting into before you sign. As long as you understand the details and the annuity is a good fit it can be one of the best decisions you could have possibly made! I am definitely pro annuities! Just be sure to understand what you are getting.

When you purchase an annuity there are certain considerations to keep in mind. Be sure to:

1. Understand the surrender charges. Surrender charges can extend for as long as 15 years in some cases and can be very expensive. Purchase an annuity that matches your schedule so that money will be free when you need it.

2. Know your time horizon for investing. When do you need money out of the annuity? How much will you need? Annuities that you purchase are meant for long term investing.

3. Know the rating of the insurance company before purchasing an annuity. If a higher rated company is offering a comparable product then choose the company with the highest rating.

4. Know why you are purchasing an annuity. Is it for safety, income, or growth? Is it for security, tax deferral, or a guaranteed income stream? Is it for other guarantees? Does it really fit into your investment plan? Are you using the annuity in place of other fixed income investments or as a growth investment? Why the annuity versus other investments?

5. Understand the differences between a fixed and variable annuity. A fixed annuity cannot go down in value. A variable annuity can go down with the stock market. They can both have certain guarantees so be sure to understand what you are getting. Can it go down in value? Why do you need to purchase an annuity that can lose value?

6. Learn about how this annuity is going to affect your taxes when you take money out. Annuities are taxed a little differently than other investments. Is your annuity in an IRA? How does that affect your taxes? Also, if you are passing this annuity down to heirs then why are you purchasing an annuity?

If you are purchasing a variable annuity:

1. Why are you purchasing a variable annuity that can lose money? If it is for the past performance you should know that the sub accounts/investment options rarely ever perform the same two years in a row. Chasing returns is a losing strategy. You need to know your reasons for purchasing an annuity. Be sure it is right option for you.

2. Variable annuities can go down. They can be down when you need to take money out. That would mean you would have less money working to recover from the downturn and taking money out would be a bad idea. If that could be a problem then do not invest in variable annuities.

For purchasing a fixed annuity:

1. Check the surrender charges once again. Usually they are higher and longer on fixed annuities than any other kind of annuity. Think long term commitment. Study the schedule to be sure that when you need money it will be available with no charges.

2. Some fixed annuities have amazing guarantee options. If you purchase an annuity because of one of these guarantees be sure to understand it entirely. How you take money out is the main concern to research. Study the details and the penalties not the process of taking money out. What does taking money out do to your guarantees and bonuses? Then compare the guarantees with other annuities and their guarantees. There are so many options now, some other insurance company may have something that fits your situation even better.

One last absolutely vital thing to check is the dollar amount of your states guarantees. Run a Google search for (your state) insurance guarantee. This is how I found my state’s guarantee. Do not go over that amount with a single insurance company ever.

Before you purchase an annuity be sure to get all of these questions answered and the details clear in your mind. Most of all do not be rushed into making any decisions. There is no reason to rush through such a long term decision like purchasing an annuity.

For step by step help on how to purchase an annuity please visit Keith’s Annuity Help Now blog or sign up for his 7 Free Retirement Annuity Tutorials that teach exactly how to set up your retirement accounts to never go down again while filling up your bank accounts with the cash you need for your retirement.

Are Annuities the Same As IRA’s? – Annuities 101

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Annuities 101 – IRA’s have been confused with annuities for years. It is very common to be a little confused about your IRA and your annuity especially considering they have been changed so much throughout the years and so have annuities. Are IRA’s the same as annuities? A good place to begin is to study how they work in relation to each other.

You may have a joint checking account at the bank. You may have a single checking account. Think of an IRA as a type of account like these. An annuity is also a type of account. When you begin thinking along these lines they instantly become easier to understand.

For annuities 101, annuities are also an account designation like the IRA, single, joint accounts, and business accounts. The detailed rules are different but one of the main rules is the same. You should be 59 and a half before taking money out or you will face a 10% IRS penalty. IRS.gov will have all of the detailed rules if you are interested.

The penalties have nothing to do with the actual company you have your IRA or annuity invested through. There could be additional fees to take money out early. The fees would show up as commissions, back end fees, or surrender charges.

The most confusing part with annuities and IRA’s is that annuities can be held inside of an IRA. An IRA is a account that is basically empty until you deposit something into it like cash, bonds, stocks, mutual funds, etc. You can use the cash in your IRA to invest in annuities. Annuity can be held in an IRA.

Remember that the IRA is an account and what is inside the IRA is the investment. Also remember that your IRA can be held at many different kinds of financial institutions. Banks, brokerage firms, investment advisories, and insurance companies can all hold your IRA investment money. That means that your IRA can be invested in an annuity.

Now is a good time for some general investment advice on how to fill up these accounts if you are investing. In general if you can still contribute to your IRA you should max it out first. Then you should invest in an annuity outside of your IRA. You can use an annuity to invest in inside your IRA but just be sure to max out the contributions either way.

During retirement, annuities are a great way to invest but not variable annuities. Your rollover money that comes from your 401k, Simple, or SEP can but used in part to invest in annuities. With the right annuity you could make your retirement money safe, secure, have guaranteed income, have a chance to grow, and be guaranteed by your states guarantee just in case the insurance company ever went out of business. This would let you get off of the stock market roller coaster for good!

In annuities 101 we have studied the differences between an annuity and an IRA account. Annuities can be part of your IRA but do not have to be. They are not the same. Also, we learned that IRA’s should be filled first before annuities but your IRA can be invested in an annuity. During retirement, annuities can help by providing the security and safety of your income streams so you never have to worry about where your income is going to come from or if you will have enough money to enjoy your well earned retirement!

To discover more about how to use annuities to make your nest egg safe and secure sign up for Keith’s step by step 7 Free hard earned retirementTutorials or visit his blog for Annuity Help Now.

All About Split Annuities

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Information on Split annuities
People who have taken up annuities as retirement option have gained a lot of financial benefits after retiring. Annuities have been a great method of gaining tax free income. There are different kinds of annuities; instant annuity provides fixed income to retirees over a prolonged period of time, deferred annuities are offering accumulation of tax free income after retirement. If you invest in any one single annuity; you get benefits offered by that annuity program. If you combine different programs; you get additional benefits and greater tax relief.

Split annuity is referred to the combination of deferred annuity and immediate annuity. Split annuity product is a combination of deferred annuity and instant annuity products; this form of annuity provides more income with the added benefit of lower income tax.

Example:
A person holds $100,000; he invests in a split annuity program. $41,500 of his total capital is diverted towards immediate annuity and $58,500 is diverted towards deferred annuity program. This person gets a return of $5,100 each month from the amount invested in immediate annuity over a period of ten years. On the other hand he gets a return of 5% on the amount of money invested in deferred annuity. This return is not given to him every month; this return is accumulated and at the end of 10 years is provided to him. This return equals to the original deposited total. After the tenure of 10 years is over; the amount can be reinvested according to an updated annuity package.

The investor gains a fixed amount of return each month from immediate annuity package. The return does not change according to varying market conditions.

When you purchase split annuity you gain the benefit of getting a smooth and fixed flow of income from immediate annuity program. The return does not change with changes in market and economy.

There are various benefits of split annuity plan over other retirement income plans. Some of these benefits include: Income or return from immediate annuity program is fixed and does not change with changes in markets.A huge percentage of the Income earned from this annuity plan is not taxed and Social Security tax deduction is not levied on this income. The total sum of income earned from deferred annuity is not counted as income until it is collected as income after the specified time period is over.

The successors and beneficiaries of a split annuity package even gain benefit. They gain additional death benefits in case of death from deferred annuity investment. Returns from immediate annuity package are even offered to the beneficiary.

Split annuity program keeps your capital secure and you constantly gain from tax efficient income for the mutually agreed period of time. In case of deferred annuity; your return equals to the amount of your initial deposit of capital.

Understanding the concepts of immediate and deferred annuity programs is very difficult. Due to this; you might even face difficulties while understanding the process of split annuity program. While investing in split annuities; you have to take many factors into consideration. You have to separately calculate the amount you are going to invest in immediate annuity and different annuity. Once you have made the calculation; you can freely enjoy the various benefits provided by split annuity. With the help of split annuity; you keep on getting income to meet day to day expenses and your capital keeps on increasing. This way; you and your successors are financially secure.

Want to find out more about split annuities, then visit Nathan Rogerson’s site on how to choose the best annuity for your needs.