I, unlike many financial professionals, do not believe that there is such a thing as a "one size fits all" perfect
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.
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.
VEJROSTEK TAX AND FINANCIAL
Home of the $100 Tax Return
Home of the $100 Tax Return
ANNUITIES: Fixed, Indexed, Immediate and Split
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| Our Mission |
To provide our clients with the
information needed on the product
or service that is of interest to them
so that they can make a wise,
informed decision
information needed on the product
or service that is of interest to them
so that they can make a wise,
informed decision
Contact us:
303-776-0867
303-776-0867
ANNUITY BASICS
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.
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 INDEXED ANNUITIES click here |