ANNUITIES

What is an Annuity and why should I have one?

Annuities are one of the most overlooked investments available today,  mainly due to a lack of knowledge regarding the product. The two basic types of annuities are Deferred and Immediate. A traditional Deferred Annuity is similar to a ‘Certificate of Deposit’ (CD), where your original deposit and interest are GUARANTEED for the amount of time you designate. However, the investment is held by an Insurance Company rather than a Bank. Deferred Annuities are available in both ‘Single Premium’ and ‘Flexible Premium’ options, Flexible Premium annuities allow for future deposits to be made.

Are their tax advantages with an Annuity?

Unlike Bank CDs, all interest and growth that is not withdrawn from a Deferred Annuity owned by an individual are tax-deferred! Under current Federal and most State tax laws, you do not have to pay income taxes on your earnings until you make withdrawals. This allows you to keep more of your own hard-earned money working for you! And in most cases, annuities also pay a higher interest rate than Bank alternatives! The tax deferral on earnings is a powerful tool, which is usually not fully understood by most investors. 

Compounded growth for the win!

When you pay taxes on the growth of an asset you not only lose part of your earnings, but you lose the opportunity you would have had for more growth on the earnings had you not paid the taxes. This has a staggering compounding effect, please use our ‘power of tax-deferral calculator’ to see how much more money you keep for yourself when you keep all your earnings and growth working for you. Annuities also offer safety, asset management, and many other advantages. In addition, annuity proceeds are paid at death to your stated beneficiary FREE from Probate! This of course saves time and expense, which is prudent Estate Planning.  In addition, earnings and growth reinvested in a deferred annuity and not taken do not count as income when calculating any tax liability for your Social Security Payments.

Can I take money out of an Annuity?

Most Deferred Annuities also offer some liquidity. Most products allow you to take your interest after 30 days and many products allow withdrawals of up to 10% of the accumulated account value each year without penalty. So you have higher returns versus Bank alternatives, liquidity, and tax advantages all in one package (withdrawals prior to age 59 1/2 are generally subject to a 10% penalty).

Multi-Year Guarantee Annuities: Slow and Steady Wins the Race

Multi-Year Guarantee Annuities or MYGAs GUARANTEE your principal and offer a guaranteed rate of interest for a specified period of time that you select. You give a specific amount of money to an insurance company, and the insurer guarantees that your investment will earn a specific rate of compound interest for a specific number of years. MYGA annuities are often called CD-type annuities or tax-deferred CDs because they serve a similar purpose as a certificate of deposit (a CD is a security purchased at a bank that pays a fixed rate of interest for a specific number of months or years). The beauty of MYGAs is their transparency – what you see is what you get. You know the rate of interest your money will earn and how long it will earn that rate.

MYGA vs Bank CD: It’s all about tax-advantaged growth

MYGAs are typically used to safely grow and accumulate funds. There is no market risk in MYGAs and again the growth is guaranteed. For that reason, MYGAs are used for the conservative portion of a portfolio. MYGAss have several strengths over bank CDs. The most obvious strength is that fixed interest rates tend to be significantly higher for MYGAs. Another key advantage is that MYGAs grow funds on a tax-deferred basis. What does tax deferral mean? It means you do not have to pay taxes on gains each year. Earnings grow tax-deferred within the annuity and no taxes are due until funds are withdrawn.

Please review the main Annuities Overview tab for more information. Don’t wait to boost your savings potential, call our office today for a quote to see how much you can Safely earn on your nest egg!

Equity Indexed Annuities: An All Upside Fixed Annuity

Please review the Annuities Overview tab for more information. Equity Indexed Annuities offer all the benefits that are included in a deferred annuity, however, the interest credited to the annuity is based on some outside market index. One of the more popular major market indexes is the S&P 500 ® McGraw Hill, Dow Jones Industrial Average, NASDAQ, Volatility Control Index, managed Balanced indexes, and fixed interest. Most companies allow you to allocate funds between separate accounts, which allows multi-strategies under one tax-deferred contract. Best of all no matter what happens to the Equity markets, since it is a fixed annuity by design you can not lose any of your hard-earned money! Your original investment and a certain minimum interest rate are always GUARANTEED. Therefore, you have the upside potential of these leading market Equity indicators, with no downside risk of principal!

Zero is my hero: Equity Indexed Annuities are a safe bet

Because Equity Indexed annuities guarantee your principal and are conservative in nature – they are a good ‘Safe Money’ alternative for your investment portfolio and therefore generally more suitable for an older investor. With the low-interest rate environment we have been in for many years now, these annuities offer the potential for higher returns than would otherwise be achieved in fixed markets. In addition since all the earnings in Deferred Annuities are tax-deferred until taken, you have the advantage of all your earnings working for you to make more money – rather than have to pay taxes on your earnings as you would with a bank CD.

Many investors do NOT realize what ‘negative growth’ really does to their portfolios and the compounding effect it has, Equity indexed annuities NEVER have a negative year design. It can take years to recover from a major market correction and if you are in or near retirement this could affect your Retirement Planning in a big way. 

Give us a call

Call our office today to get a quote and discuss your questions or concerns to see how an Equity Indexed annuity can work for you in your investment portfolio!

An Annuity that Pays you for Life

There are plenty of ways to create retirement income, but only a few of them come with guarantees. Retirement Income Planning is NOT the same as Retirement Income guessing! Most of us want our retirement years to be our Golden Years – the Happily EVER after YEARS! This can be achieved with a predictable guaranteed monthly income which is sufficient to sustain our retirement plan budget. However without an income to count on and with constant market turmoil your retirement years could be stressful and more like a living nightmare than living happily ever after. Most Monte Carlo simulations have a disclaimer stating that the information is deemed to be 80% correct up to age 90 – what happens after age 90 and what about the other 20%?

Adding a rider to your Deferred Equity Indexed Annuity for lifetime Income

Guaranteed lifetime income riders are features offered on Deferred Equity Indexed annuity contracts and they can be quite appealing because they do just that – they guarantee lifetime income. They are called ‘riders’ because they are contractual guarantees attached to an annuity contract offered by a Life Insurance carrier. Life insurance companies traditionally insure us against dying too soon – we are all familiar with life insurance. However, they also insure us against LIVING too LONG! This is a big concern in Retirement Planning – running out of money during your lifetime in retirement. Pensions that provide a lifetime income are few far and few between these days except in the Public sector. Social Security does provide a lifetime income but is usually not enough income to live on. Many Baby Boomers are retiring with impressive 401 (k) Balances – however, will this money last the rest of their lifetime and provide the lifestyle you are accustomed to? You can take all the guesswork out of this with an annuity that offers a Lifetime Income Benefit Rider. You and your spouse (if applicable) can enjoy a stream of income that you can never outlive – GUARANTEED! 

Growing your retirement income tax-deferred

These annuities work great as a Retirement Plan distribution strategy but also work well as an accumulation vehicle. Before you begin taking your lifetime income most products offer indexed returns to some outside Equity Index in order to grow your actual account balance, please review the Equity Indexed Annuities tab for more information. However, there is normally a guaranteed rate of return that is credited to the ‘Lifetime Income Benefit’ account – no matter what the equity markets do. In addition, you can not lose money in a fixed annuity – your principal and some minimum amount of interest are guaranteed. So even if the actual account value does not increase it can not decrease based on a market correction and no matter what the markets do your Lifetime Income Benefit account value is credited with positive earnings based on the declared rate – which is guaranteed for the initial period you select.

The markets may drop but you’ll still be whole

This strategy can take a lot of stress off people in pre-retirement and in retirement so they can sleep easy at night. It can also take the stress off assets that are invested in the equity markets to grow, while at the same time taking distributions for income. This way if the markets have a correction, you do not have to panic because your monthly living expenses are guaranteed and you can just wait for the market to correct again. In addition, lifetime income payments from retirement plan accounts qualify as Required Minimum Distributions (RMDs) once you reach 70 1/2 years old.

Don’t do Retirement Income Guessing when you can GUARANTEE your retirement income and live your ‘Happily ever After’. Call our office today and get the information you need to make the right decisions for your retirement income planning! 

Single Premium Immediate Annuities: A Safe, Tax-advantaged Income

Single Premium Immediate Annuities or SPIAs – many people looking for income in today’s low-interest rate environment are finding Immediate Annuities (SPIAs) offer exceptional payout alternatives. In addition, SPIAs offer safety and tax-advantaged income! SPIAs either pay a guaranteed income for a specified period of time or a lifetime income that you can not outlive. 

SPIA can help save tax dollars from IRAs and 401k!

An Immediate Annuity can provide tax benefits by spreading out the tax liability of a large distribution from a Qualified Retirement Plan such as an IRA, 401 (k), etc. over a period of time. For our clients who have heirs, many times they can use a portion of the increased annuity income to purchase ‘tax-free’ life insurance. Thereby replacing a ‘taxable’ asset to your heirs – with ‘tax-free’ life insurance proceeds!

Call our office today to see if an SPIA has a place in your financial or retirement planning!