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Fixed Annuities: What You Should Know !
Basic and Helpful Information about Fixed Annuities: Learn about: S.T.Y.L.E.
The SE Agency
Independent Financial Advisors
August 25, 2010
In today's challenging economy, Fixed Annuities are becoming increasingly popular with both Pre-Retirees and Retirees. Why ?
Simply because of their
S = SAFETY:
Fixed Annuities typically offer Guaranteed Interest Rates, which equates to Guaranteed Income. A 100% Guarantee !
The Guaranteed Interest Rate, is declared by an insurance company at the beginning of each contract period. You can elect a % of your account value, to participate in this interest crediting method.
For the more adventurous, some Fixed Annuities offer other Interest Crediting Options.
Examples being paralleling an index such as the S&P 500 or Bond Market.
You will receive income based on the annual gains within these markets, subject to a cap.
You can never incur loss here:
The worst you can do is ZERO, should the S&P 500 or Bond Markets do poorly for that given year.
T = TAX DEFERRED SAVINGS:
Another key feature of a Fixed Annuity, is Tax Deferred Savings.
You do not incur any tax liability, until you start making withdrawls.
As a matter of fact, you earn interest income on tax deferred monies.
Additionally, most people are in a lower tax bracket, when they start taking withdrawls. Therefore, lowering your tax liability.
Y = Yield:
When it comes to yield, I always refer to
4X = QUADRUPLE COMPOUNDING:
Interest on Your Principal.
Interest on Your Interest Income.
Interest on Cash Bonuses.
( Applicable to Cash Bonus Plans, which I always recommend.)
Interest on Your Tax Savings.
L = Liquidity:
Liquidity refers to access to your money.
Here are the basics, with Fixed Annuities.
If you have a deferred plan, which pays you interest income, there is a Surrender Charge Table.
These can range from a few years to several years.
Plans that pay Cash Bonuses, have longer Surrender Charge Tables.
Please be aware of these and How to Avoid Surrender Charges:
I. After the first contract year, at age 59 1/2, you have access to 10% of your account value with no penalties. Remember:
II. Many Fixed Annuities come with Nursing Home & Terminal Illness Riders.
Giving you partial, and then full access to your funds, without surrender charges.
Make sure that you have these Riders fully explained, as they do vary slightly
III. Minimum Distribution Requirement:
IRS Mandatory Distributions at age 70 ½.
Your carrier will compute this, and inform you of your distribution options.
You absolutely need to understand all of the above, and make sure they fit into your overall financial requirements. In other words, make sure that you have enough monthly income from other sources, to meet your needs.
E = Estate Advantages:
Whenever you have a financial plan that specifically designates Beneficiaries,
such as a Fixed Annuity, it helps to eliminate estate and probate costs. If and when
the annuity owner passes away, there is a clear legal document ( Annuity Contract), specifying where and how the funds are to be distributed.
For further information about Fixed Annuities, please visit our website at:
To order one of our Free E-Booklets:
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The SE Agency specializes in Better, Safer, Smarter Retirement and Investment Plans.
IRA, 401k, 403b Rollover and Distribution Advisors.
Proudly serving clients in Southeastern PA and Southern NJ.
GUARANTEED Interest & Income, Immediate Cash Bonuses.
Page Updated Last on: Sep 11, 2010