financial product. But I do believe that annuities are the perfect instrument for many scenarios, not all, but
many. There are many varieties and benefits that we will discuss here and on the connecting pages
including fixed, fixed indexed, immediate and split annuities. Annuities main benefits are in controlling
income taxes and providing an income that can never be outlived not to mention the possibility of a better
than average "safe money" return and yet as safe as any other product on the market.
An annuity is a type of savings account that is issued by an insurance company rather than a bank. They are not
FDIC insured, but they do have strong guarantees backing them up. For one they have the claims paying ability
of the insurance company backing them up. Being that insurance companies are regulated by the states, as
opposed to the federal government, it is mandated by state laws that the insurance companies maintain what are
called "reserves". The reserves mean that the insurance companies have enough liquid assets on hand to pay off
all of their potential liabilities. Furthermore all states now have what are called "state guarantor laws" or acts.
What these acts provide is that the states have the right to charge every insurance company that does business
in the state a premium to cover any losses that might be incurred by any of the companies becoming insolvent. In
other words if one company does go into reorganization, all the other companies have to chip in and make good
on the guarantees that the policies provided for the clients. No one can lose money in an annuity so long as they
stay within the boundaries of the guarantees.
The guarantees usually provide for $100,000 per person. The nice thing about these guarantees is that unlike
FDIC insured bank accounts, not only is your principle guaranteed but so is at least a minimum amount of interest.
The minimum interest guarantee varies greatly from company to company and from product to product, usually
somewhere between 1% and 3%.
There are two other great benefits to annuities that need to be addressed here. One is the way that you are able
to withdraw funds from the annuity without paying "early withdrawal charges" which you would find in cd's and
some mutual funds. With almost all annuities you are able to withdraw 10% of your balance with no penalty. Lets
say for an example that you put $50,000 in a cd and $50,000 in an annuity and then an emergency came up and
you needed to take $5,000 out. With the cd you would have to break the cd and you would be charged on the
average 6 months worth of interest on the entire amount. In this case that would add up to $3,000. On the other
hand you would be able to take the $5,000 out of the annuity and you
would not be charged any amount at all. Let's take that one step further and say you had to take out $10,000
instead. With the cd you would have the same result and have a $3,000 penalty. With the annuity in this case
you may have to pay as much as 10%, but only on the amount over and above the free 10% withdrawal amount.
In this case that would add up to 10% on $5,000 or $500 which is still a whole lot better than the $3,000.
The greatest benefit of annuities though, is the fact that they grow tax deferred. That means that there are no
taxes paid on the earnings until you withdraw the earnings. You get to control when you pay the taxes on those
earnings. This also gives us the power in many instances to control when and if we will pay taxes on other income
such as social security incomer or even IRA withdrawals. Sometimes by setting things up correctly we can show
people how through the use of annuities we can actually help them get a lot of their money inside their IRA's
absolutely tax free.
For specific information on INDEXED ANNUITIES click on the box right above this article.
Of course if you have questions feel free to contact us at anytime by either phone or email.
|Indexed Annuity Information
|ANNUITIES WERE INVENTED
BY THE ROMAN'S
THOUSANDS OF YEARS AGO.
The Roman's needed money
to finance their campaign to
conquer and control the rest
of the world. So they came
up with the concept of an
"annua" if you loaned your
money to the government
they would in return provide
you with an income for the
rest of your life.
The start of modern day tax
deferred annuities came into
existence here in the United
States in 1912 just 1 year
before income taxes actually
came into existence. I know
that doesn't make sense to
me either, it was probably
the first of many to come tax
Since then annuities have
evolved into a more flexible,
useful investment tool. I
know you have probably
heard bad things about
annuities, but you need to
consider the source.
Financial magazines make
their money from their
advertisers not us the
readers. Since most of their
advertisers are Wall Street
firms and banks they are
never going to say
something that would upset
their clients. Since Wall
Street can't offer the
guarantees of principle and
such things as a lifetime
income and banks can only
offer lower returns because
of their high overhead, you
can see why they see
annuities as competition
rather than part of a sound
We hope you will take the
time to read the rest of the
information provided here.
|NO Company Sponsored Pension
BUILD YOUR OWN
Using your 401K and/or IRA