Pros and Cons of Annuities

What are the Pros and Cons of Annuities?

It may send your mind into an infinite loop to imagine using money to buy money products, but that’s just how the financial world works. And Americans did just that! In just the third quarter of 2016, USA investors analyzed the pros and cons of annuities and spent $51.3 billion on them.

Sound like a lot? Maybe not. Turns out that we bought $58.5 billion in annuities in the same quarter of 2015, which represents a 12.3 percent decline in one year.

What’s going on here? Have the tides turned or are more investments clogging the market and our wallets? Read on for a major return on investment.

Pros and Cons of Annuities 101

Mastering annuities can take an entire semester or more in a hard-core economics school, but we’ll try to break it down for you.

Annuities are retirement-focused investments that pay you money.
You can pay a lump sum (one-time) for the annuity or schedule payments, depending on the annuity and your Advisor.
Excellent option for tax-deferred retirement income
No annual contribution limit
Not all annuities are the same. They include:
- Fixed (Guaranteed income no matter what happens to the market or the insurance company, but these annuities do not adjust with interest or the cost of living)
- Indexed (Flexible, but also returns a guaranteed minimum)
- Variable (Totally dependent on how the funds you select to do in the market, this is your riskiest option)

Pro: Fee-Free Fix!

If the idea of paying fees for an annuity just doesn’t add up, an indexed or fixed annuity may be an ideal match for your investment portfolio. You can buy these types of annuities from an insurance company and will not be assessed an administrative fee on top of what you put into the fund unless you add a rider or a link to the rider.

Buyer beware! These types of annuities don’t have administrative fees, but that doesn’t always stop less than respectable agents from trying to tack them on.

And you probably know we can’t get something for nothing.

As you enjoy the benefit of the no-fee annuity, keep in mind that you will (more than likely) experience fees if you withdraw from that annuity before the agreed-upon period ends. When you do need to make withdrawals, you may face surrender charges.

Financial companies have to make their money somewhere. But if you purchase this type of investment, choose one that has a term you can be happy with long-term and you’ll be feeling free.

Con: Early Demise Can Bring Surprise

And we aren’t talking about to the decedent.

When you purchase an investment, you’re looking into that crystal ball of the future for a long, long way off.

Unfortunately, life tends to get in the way of our plans.

Let’s say Person A purchases a 10-year annuity at age 55, expecting the annuity to come due at age 65. Person A then passes away at age 57, 8 years before the annuity date.

As the University of Wyoming explains, if the annuity holder dies “early,” the annuity could lose value as it passes on to the next property holder (the designated recipient from – in this case – Person A’s will).

Of course, it’s good to plan for the future and no one knows what the future will hold, so not purchasing annuities out of fear can really hold you back.

Pro: Income Stream, Flood, or Trickle

For many, annuities are a choice because of their income-providing potential.

You may be thinking, if I have the money, why am I going to give it to an Advisor who will then slowly trickle it back to me?

It almost makes this consideration of pros and cons of annuities more like no and cons!

But let’s take a step back.

Yes, you’re handing over a (sometimes large) lump sum of money.

But these “immediate annuities” really do provide you that stream of income because you get back guaranteed payout for as long as you live. Whether that amount surpasses your lump sum or not, you continue to receive the payments.

Whether you’re about to be swimming in a small creek or a huge basin of water-slash-income for the rest of your life depends on how you set things up with your Advisor.

Con: You Need Money to Make Money

Unlike stocks which you can literally purchase for a couple of bucks a share or bonds with just a small out of pocket cost, annuities don’t come cheap.

Some annuity advisors suggest you start with a minimum of $10,000 to $25,000 investment. Remember, when considering the pros and cons of annuities, you need to keep in mind that the annuity is supposed to be an income stream for life. That $20 for the hot stock on the market won’t get you very far in annuity land.

Also, the more money you can invest in an annuity, the better rates you can get. It may not seem fair that those who have the money to assure themselves a better income stream later in life may not need it.

But that’s how the annuity world works and once you understand it, you can play it to your benefit.

Ask your Advisor if he or she offers flexible premium annuities. Not all of them do, but you may be able to enter into this type of annuity with a minimum purchase of just $100, which definitely does seem more “flexible” than $10,000.

Cash In on Your Experiences Here

Still feeling like less than a hundred bucks at all the pros and cons of annuities?

Don’t worry. Help is available.

Free help. With no administrative fees or early withdrawal penalties!

Click here to sign up for a free consultation and annuity review. (Guess you CAN get something for nothing!)

By the way, be sure to ask your prospective agents about their experiences and length of time in the business. We don’t want to scare you, but if your Advisor goes out of business, you may lose your annuity investment, too.

This depends on the investment and other legalese, but it’s all the more reason to be informed, to make good choices, and to not get ripped off.

We’d love to hear from you, too, about your annuity experiences. Have you ever had to make an early withdrawal? Did your annuity consultant assist you?

Please share in the comments below and let’s help each other start saving!

Does Your State Protect Your Annuities From Creditors?

Annuities are like other financial assets. Often times, litigation efforts and creditors are able to gain access to them. As a result, the money you worked hard for is at risk.

Protect Your Annuities

O.J. Simpson & Florida Exemptions For Annuities

Remember O.J. Simpson? I’m not talking about the notorious car chase in the Ford Explorer. According to MarketWatch, O.J made some poor financial decisions in Vegas. Consequently, those decisions led to lawsuits that ordered him to pay back creditors. O.J. put most of his money in annuities in south Florida where he lived at the time. Lucky for him, statutes in the state of Florida shielded his annuities from being touched by creditors. “If the glove don’t fit, you must acquit” may as well be, “If annuities hold your cash, you’ve protected your own a$*”. You get the picture.

Florida is one of the states that many business owners, physicians and wealthy investors choose to invest, as 100% protection is offered by the state’s annuity laws. In fact, Florida state law protects your home once it is paid off in full. This means that if you’re ever sued, or creditors attempt to collect your debt through he seizure of assets, they cannot touch your home or your annuities. Yet, many annuitants don’t know the laws of their state.

Plan For The Worst, Hope For The Best

Why is protecting your annuities important? You can never really plan when you’re going to be sued. However, IRA’s and retirement planning can protect your assets. How? Your retirement plan is protected under federal law even when filing for bankruptcy! Do I have to spell it out for you? Find out if you live in one of the states that protect your annuities!

Which States Offer 100% Annuity Protection?

Some states offer 100% creditor protection. Arkansas, California, Florida, Georgia, Hawaii, Indiana, Texas and Louisiana offer 100% annuity exemption. Maryland, Michigan, New Mexico, Ohio, and Oklahoma do as well. Kansas exempts annuities that have been maturing for a year or longer. Tennessee allows annuity protection from creditors only if it’s part of your retirement plan.

Some states allow an exemption only if you have beneficiaries such as a spouse and/or children. New York exempts only a decided amount after a “due and proper amount” is paid to the creditor(s). Furthermore, states such as North Carolina, New Hampshire, Mississippi, Maryland and Connecticut offer no annuity protection from creditors at all. Statutes are different from state to state. As a result, you have to know if you are protected.

Your Guide: Which States Protect Your Ass-ets

Finally, you have to consider your beneficiaries. Your spouse and children may depend on your assets in case of medical emergencies, or a college fund. In addition to living in a state that has fair statutes for your annuities, you may also want to learn about the different kinds of annuities. While your bank may offer some insight, it’s better to know for yourself from a source that doesn’t have a vested interest in your investment. Read my blog on fixed indexed annuities for details about the most popular annuity that consequently gives you the highest interest. Use this as a guide to check the statutes in your state.

The Importance of Understanding The Different Types of Annuity

Understanding Different Annuities

Receiving A Paycheck For The Rest Of Your Life Sounds Great, Right? This isn’t a dream. It’s actually possible thanks to annuities.

Annuities are a form of life insurance. You pay a sum of money (called a single premium annuity, not to be confused with a SPIA). This can be either all at once or over a period of time (flexible premium annuity). In return, your money does not go down (only if you buy from one of our advisors), it only goes up (depending on the crediting option you choose). Also if you buy an income rider (you will pay a fee, should only be about 1%) you receive regular disbursements of that money until you’re no longer living.

A staggering 84% of Americans believe that this is a beneficial concept, yet only 14% have actually purchased an annuity themselves.

A primary reason for the hesitation: A lack of knowledge around annuity options and uncertainty around purchase procedures.

It’s important to understand that not all annuities are created equal before you sign on the dotted line.

Interested in learning more? Let’s dig in!

The Big Two: Deferred Annuities Versus Immediate Annuities

Our discussion on the different types of annuity must begin with the two major categories: deferred and immediate.

Deferred Annuities

Put simply, deferred annuities are those that you don’t receive until a set time in the future. Essentially, you pay your premiums in full, then wait. Some you can add money to called a flexible premium. I like the flexible premium annuities because they allow you to make additional deposits and all of the money matures at the same time. Again this is only available when you buy through our network of advisors. We have removed 90% of the annuities on the market and only allow the top 6-8 insurance carriers to be sold. That said other insurance people or advisors will sell you anything just to make a commission, we make sure you don’t get screwed.

The obvious advantage to this type of annuity? The longer your money sits, the more it grows. In addition, the investment remains tax-free until you’re ready to pull it out, at which time it’s taxed at the ordinary income rate. Again any return you made in the annuity comes out first and you pay tax on that.

Are Deferred Annuities Beneficial?

This type of annuity is also beneficial in the sense that it works with almost every pocketbook and timeline. Got a large sum of money you’re ready to invest? Great, you can put it all on the table and pay your premium immediately, again up to $1,000,000 (and we do a few per month that are above this number). Rather wait and pay your premium off over time in regular intervals, flexible premiums? That works too. Most annuities start at $10,000 or $25,000.

Yet, while time is on your side in that regard, it might be against it in another. The main drawback to this type of annuity is that you have to wait to access it.

If you make withdrawals before you reach retirement age, you’ll not only pay the income tax on your earnings. You will also be subject to some pretty hefty early withdrawal penalties and surrender charges, some of which could be as high as 20% of your investment when you buy outside of our network. REMEMBER do NOT allow anyone to sell you an annuity that has a surrender charge that is over 9% MAX MAX 10% and the term should not exceed 9 years. Most should be 6-7-8 years.

Immediate Annuities

The other type of annuity is an immediate one.

Contrary to deferred annuities, which have an accumulation period during which you must wait to receive your earnings, immediate annuities start paying out no more than one year after you’ve paid your premium.

While most people choose to invest in deferred annuities when they’re fairly far from retirement age, those closer to that magic number might want to invest in immediate annuities.

This way, they’ll be a shorter window of time between when they make their payment and when they begin receiving their money.

Another advantage to these types of annuity is that they can provide a useful tax break. Here’s the breakdown:

The payments you receive on an immediate annuity are divided into interest and principal.

While the interest is taxed as ordinary income, the principal on these types of annuity remains tax-free, because it is essentially a return on your initial investment. This is known as the exclusion ratio.

Yet, one of the main drawbacks to an immediate annuity? It expires when you do, so the window of time to access it might be narrow depending on when you choose to invest.

Annuity Sub-Sets

Once you’ve decided whether you want to invest in a deferred or immediate annuity, there’s one more step to take. Now you must decide if you want to invest in a Fixed (Traditional), Fixed Indexed (FIA) or Variable Deferred Annuity.

Fixed (Traditional): This type of annuity is essentially a savings account offered by your insurance agency. The agency will use its in-house portfolio to determine the rate at which your money will build interest during the accumulation period. Lock in your interest rate in order to guarantee yourself that rate. That’s the good news. Most fixed products are 3 years to 7 years. The sweet spot as of this post is 5 years.

That same lock-tight security applies to your payments on these types of annuity. The amount you receive is then set. It will not change over the course of your lifetime.

This type of annuity is one of the safest and is advisable for the more risk-averse population, generally those 60 and older.

Fixed Indexed (FIA)

While Fixed Traditional deferred annuities lock you in a certain interest rate, the interest provided under FIA (index annuity) annuities is based on how the stock market performs.

Consequently, your interest rate is determined not by an internal portfolio, but by the performance of an external index. One example is the S&P 500.

While the credited interest is subject to these external conditions, it may fluctuate during the accumulation period, but it will never fall below zero.

Variable

Interest rates are subject to market volatility. A company’s rate lock does not offer security. They could even go way below zero. It is like owning mutual funds. When the market drops 20% your variable annuity will fall even more then 20%.

Such conditions can be risky. Your insurance company will set a minimum payment amount at the onset to ensure that no matter how the market dips and surges, you’ll have a guaranteed payout at the end.

PLEASE REMEMBER the FEES on this type of annuity are 3-5% and have market risk. Most of our clients do not buy this unless they are in their 30’s max 40’s and have 20 years before they retire.

Making the Move: The Right Types of Annuity For You

Not sure if an annuity is right for you? Or maybe you’re sure you want to invest, but you don’t know where to start or who to talk to?

That’s why we’re here. We make it easy to pick the investment plan that best fits your budget, goals, and future dreams.

Learn more about the services we provide, browse our blog for relevant topics, or leave a comment below and let’s start saving!

What Is A Tax Deferred Annuity?

Tax Deferred Annuities

So you’ve decided to stop stuffing money under your mattress (or the bank account equivalent of putting it in a savings account with 0.000001% interest).

Congratulations! Before you lose your motivation, let’s explore why a tax deferred annuity could be an ideal option for those funds.

Although annuities are often associated with retirement income, you do not have to be on your way to your sunset years to purchase these products. Instead, read on to decide what’s the best investment for your needs. We promise this will make cents!

Just the Tax Facts

First up, you may have heard of tax-deferred annuities called by another name: “fixed tax deferred annuity.” For sake of brevity, we’re going to lop off the “fixed.”

One of the first things you need to know about this investment strategy is that it is a contract. You are entering into a commitment to yourself and your insurance company. (So choose wisely!)

Second, this type of annuity may or may not guarantee income.

Wait! Don’t rush off and quit your job just yet.

There are, indeed, benefits:

Annuities are, as their name says, tax-deferred. Other investment strategies such as certificates of deposit are not. This benefit leads to compounding interest!
Income stream, guaranteed for life if you choose this option.
Safety, in that the annuity is backed and sold only by qualified life insurance companies that hold reserves equal to the withdrawal value of your policy.

There are also, oh yes, drawbacks:

The biggest drawback of tax-deferred annuities is for those people who are just commitment-prone. You may think an annuity is the hottest thing on the planet, but what happens when you change your mind?

Fees and surrender chargers. That’s what happens. Penalties can be huge for early withdrawal on annuities, so just don’t do it. Once you commit, do not quit. Please remember NEVER EVER buy a product that is longer then 9 years. Most should be 6-7-8 years in term before it’s out of surrender.

Tax Deferred Annuity for You and Me

OK, maybe you’re not ready to purchase that annuity just yet, but your neighbors, friends, coworkers, and business owners all are.

The Insurance Information Institute studied insurance product purchases from 2006-2015 and saw an upswing in deferred annuity asset purchases. In 2015, the last year of their study, consumers bought:

$1,922 billion in variable annuities
$448 billion in fixed annuities
$334 billion in indexed annuities

Although 2013 was the highest for annuity purchases in the time frame studied, the three most recent years (2013, 2014, and 2015) soared over all of the other years in the timeframe.

So who are these buyers pushing up the numbers?

It’s not who you think.

It may seem like only the rich can afford to purchase insurance products that will make them richer. But really, 70% of annuity buyers have household incomes under $100K.

And if you think tax deferred annuity buyers are only a certain age, think again. Please remember most insurance carriers only allow you to buy income rider annuities after the age of 50. But if you are looking for safety and tax differed growth you can purchase these at any age. Please remember there are IRS penalties if you take the money our before 59.5 but we can show you have to push this back and not be taxes, through a 1035 exchange.

In 2015, USA Today reported that millennials were snapping up annuities. This actually makes sense, because annuities really do benefit you in the long-term. Millennials have a long way to go before they’re able to tap into their retirement plans, so they’re thinking future-forward and putting money away for decades down the line.

It’s Guaranteed: Death and Taxes

Ah yes, the old cliche, that you can only count on two things in life: death and taxes.

Well, interestingly enough, the two commingle pretty well when it comes to tax-deferred annuities.

It sounds a bit like something out of the Marvel universe, but you should ask your annuity pro (your financial advisor) about the Death Benefit Rider.

Not all insurance companies offer this. And of course, the riders vary by company, so you really do need to ask for clarification.

There are two basic kinds of death benefit rider annuities:

Guaranteed payout of the initial amount (lump sum) invested, with – of course – reductions for any withdrawals you may have taken out; or
Guaranteed payout of the highest recorded value of the contract.
Guaranteed payout with rising income.

The Sky (and Your Age) is the Limit

Like other retirement investments, tax-deferred annuities have their own set of rules and regulations.

Contributions come from pre-tax income, when you buy them inside of your IRA’s / qualified accounts.
You can start withdrawing after age 59 and a half but remember taxes come our first on any growth you have had.
You can contribute as much as you want to your tax deferred annuity. Most start at 10,000 or 25,000 and require approval for over 1,000,000

The exceptions and fine print can really make your head spin, such as lifetime limits, income amounts and crediting options (how you make money in the annuity).

Basically, there are options, but do not hesitate to wave your hand and ask for help!

Important note: The government, insurance agency representatives and the Securities Exchange Commission are always coming together to refine these rulings. It is best to talk to your investment professionals to ensure you’ve got the latest and greatest details.

What to Do with an Annuity

Aside from, of course, enjoying the benefits of your good long-term planning investment!

And no, we aren’t advising to withdraw it all and hit the horse races.

You should know that you do have the option to withdraw your entire investment as a lump sum once the investment period expires or most index annuities will allow you to withdrawal 10% per year.

You can also roll the money from the expiring tax deferred annuity over (similar to how you would do if you have a certificate of deposit that is expiring) and pay zero taxes on that transaction. This transaction is called a 1035 exchange. We can help walk you through this process.

Be warned! Shady advisors hide this option from clients to make another commission. Do not fall for this, get a second opinion.

Let’s Talk

We’d love to hear if you fall into the 70% of annuity buyers in the income range studied. Have tax-deferred annuities helped you planning out your future?

Already have an investment strategy? That’s OK. How about a free review and comparison of where you may be better placed with your funds? It’s just too easy to get ripped off these days.

We want you to be informed, make good choices, and be excited about your future. The best way we’ve seen to do this is to educate, educate, educate. Once you purchase the wrong tax deferred annuity or put too much money into an annuity that is not tailored to your needs, it can be hard to come back.

Whether you’re feeling risk-tolerant or risk averse, let’s talk tax annuities together.

Join the conversation below. You can also post a request for more information or click here to receive fast, no-cost, no-commitment information tailored for your investment and future financial needs.

When is the Right Time to Get a Fixed Index Annuity?

Fixed Index Annuities (FIA) are growing in popularity.

Positioned to take over all other annuity products in sales, FIA products are offering the best of both worlds for investors.

Protect Principal, Spark Growth

You can both protect principal and spark significant growth with an FIA product.

One of the only downsides with FIA products is the incredible variety of crediting options available (how you make a return). With different formulas and competing companies offering the investment opportunity, it can be confusing to know when and where to buy.

Financial advisors recommend the product for growth and protection. But financial advisors also warn to be wary of bad products with confusing returns.

Plus, there are so many varieties of annuities available, it can be difficult to know which one is right for you. A Single Premium Immediate Annuity (SPIA) offers distinct benefits that are different from a Fixed Index Annuity, for example.

It’s important to understand the financial product you are investing in and decide if it’s right for you.

If you already own annuities, especially if it’s a variable annuity, you should consider a move to a Fixed Index product. The market saw a huge move away from variable annuities into index annuities. And if you are new to annuities you may be wondering if they are right for you.

There’s no time to waste. And we can help you find the best annuity.

You could be seeing your principal rise with every move of a major market index. Let’s make sure you know when to buy.

We’ve put together some expert tips about FIA products (Fixed Index Annuities). We’ve got you covered.

Ready to see what an FIA product can do for you? Here we go:

What is a Fixed Index Annuity?

Before we decide when you should purchase an FIA, let’s make sure you know exactly what the products are.

A Fixed Index Annuity credits a minimum guaranteed rate of interest over a fixed number of years. Plus, additional interest may be credited based on the percentage change in the value of a broad market index.

This additional interest is calculated using a formula. The result determines how much of that percentage change applies to the value of the individual’s FIA.

Example: An FIA with a participation rate of 50% of the change in the value of the S&P 500 index. If the index returns 10% in a policy year, 5% would be credited to the account.

An FIA limits upside which limits risk as well. They are a great combination of elements for a financial growth plan.

In addition, many FIAs now offer Guaranteed Lifetime Withdrawal Benefits. This makes a Fixed Index Annuity both an accumulation and income solution.

The first FIA products hit the market in 1995. But adjustments to formulas and refinement of the product has made it more popular in recent years.

Fixed Index Annuity products have grown significantly.

Sales increased 14% to $38.7 billion in 2013
Sales increased 24% to $48 billion in 2014.
This represents 21% of all annuity sales.
Experts expect growth rates of FIA products to continue.

This growth is due to the benefits an FIA offers over other similar annuity products.

The Distinct Phases of an Annuity

Understanding the two distinct phases of an annuity will help you create a strategy that works for you. Seniors are often swindled by the unrealistic promises of an annuity product.

In some cases, you will need to make a decision between a lump sum payment into your annuity (single premium) or a gradual investment period (flexible premium).

What About The Risk?

If you are wondering when is the right time to jump into the perfect Fixed Index Annuity for you, it is now.

Experts point out that the upside of a Fixed Index Annuity is that it “gives you exposure to the market but at no risk of loss to your principal.”

A Fixed Index Annuity is a fixed annuity with a variable rate of return. This return is based on an index.

You don’t have to worry about the loss of your principal with an FIA.

While you may consider other products for their growth potential, as a retirement option, the FIA gives you both protection and growth. When talking asset allocation this is the conservative money, money that you would put into bonds or bond funds.

As long as you understand the formula, and have expert advice, you don’t need to hesitate.

Understand The Formula

Different Fixed Index Annuities offer different opportunities for investors. Some critics warn that the products can be difficult for buyers to understand.

The Securities Exchange Commission (SEC) warns that all “indexed annuities are complicated products that may contain several features that can affect your return.”

They suggest that “you understand how an indexed annuity computes its index-linked interest rate before you buy.”

The SEC also points out that “an insurance company may credit you with a lower return than the actual index’s gain.”

There are incredible upsides to FIA products. But you need to know the exact benefits and risks of the product you are thinking of investing in.

The right time to buy a Fixed Income Annuity is only after you understand the product and if it’s right for you.

An expert can help.

Get Expert Help

Everyone’s journey is different. And with market fluctuations and a wide range of different products on the market, it can be difficult to know when the time is right.

Your personal financial situation and financial goals can affect your decision making as much as any other information. You need to know when the time is right for you.

A financial advisor can help.

You don’t need to try and navigate the complex world of annuities on your own. Tennessee Annuity Rates can provide you with information that is essential to your financial journey.

For families looking to protect their assets. Consequently it’s best to get help from a trusted advisor. Don’t wait.

Did you know Tennessee Annuity Rates offers a free consultation to help assess your situation and find the best strategy for you and your loved ones?

Two Distinct Phases of an Annuity

What Are the Two Phases of an Annuity?

The Accumulation (or Investment) Phase:

This is the phase in which you add money to the annuity and collect interest in some form. A purchased deferred annuity is necessary when this option is utilized. You can purchase one in one lump sum. You can make investments periodically over time.

The Distribution Phase:

This occurs when you begin distributions from the annuity. Two general options for receiving distributions are available.

The first option allows some or all of the money in the annuity to be withdrawn in a lump sum. The full contract value can be “rolled” into another agreement without paying taxes. This is called a 1035 exchange. The second option while using an income rider is to turn on the income rider. A lot advisors positioned variable annuities win the past with very expensive riders (3-4%). Their clients have never turned on the rider.

If you have an income rider and you have either not turned it on or just turned it on, you should have it reviewed as soon as possible. Most of the time you can LOWER your fees from 3-4% to 1% and get 10-30% more income! Contact me for more information. I’m here to help you.

What Is A Surrender Charge?

What is a Surrender Charge?

Annuities: Withdrawals At no Charge

A deferred annuity may be surrendered to receive a lump-sum payment of the account’s value. Most annuities have a surrender period that allows withdrawal at no charge. Withdrawals during the surrender period (meaning during the contract term, remember only allow this to be a MAX of 10 YEARS!) are usually subject to charges based on several factors including the account value and the number of years remaining. DO NOT accept any surrender charges over 10%. If you have any questions please contact us. Some products will have 14% or 20% surrender changes. Insurance companies should not sell these!

Surrender-Charge Free Withdrawal Options

Annuities are long-term instruments designed to accumulate money for retirement. Consequently, they provide the best possible benefit if left intact. Many of our products provide a number of options to withdraw because you should have options. Hence, options include 10% penalty-free withdrawals. Most noteworthy, they include interest withdrawals through the easy systematic payment program. Certain products withdrawals prior to age 59½ may be subject to restrictions and a 10% tax penalty. This is because of IRS regulations. These options vary by annuity, yet may include:

10 % annual withdrawals.
5% annual withdrawals Waivers for certain medical conditions
IRS required minimum distributions (RMD freindly)
Substantially equal periodic payments

Are There Any Fees For My Fixed Annuity?

What Are The Charges For A Fixed Annuity?

Most annuities do not charge up-front sales charges, rather they have charges for withdrawals before the end of a stated period. A fixed and fixed-indexed annuity do not have administrative fees, although interest crediting rates take into account expenses related to the product.

Variable Annuities

Variable annuities may involve ongoing maintenance and administrative fees to provide guaranteed death benefits and cover expenses related to the product. When purchasing a variable annuity, information regarding contract charges in the contract’s prospectus is available.

All this means is that with an index or fixed annuity there are no fees. Therefore, if you buy from the right insurance carriers, you’ll have little if any fees. Say you invested $100,000 into a fixed or index agreement and made no money. As a result, at the end of the term, you would therefore still get your $100,000 back. Some index annuities have a guaranteed minimum amount of a return, sometime this is as much as 1% simple interest.

In conclusion, say you purchased an index annuity with a 7 year term and it had a minimum of 1% simple interest. You made no money in the contract because the S&P 500 was down 7 years in a row. They would have to give you $107,000 at the end of the term.

Access to Funds: What if I need to access my money during the accumulation phase?

Access to Your Money

What if I need to access my money during the accumulation phase? Annuities are designed to accumulate money for retirement. Hence, they provide their best possible benefit if left intact. This is without taking out any withdrawals. Some of our products offer withdrawal options in your annuity that include 10% penalty-free withdrawals. and first-year credited interest withdrawals. Be careful here, some annuities only allow 5% or interest only so please make sure you understand what options you have before you purchase an index or fixed annuity.

Withdrawals may be subject to early withdrawal charges and taxes. Meaning, if you take over the allowed amount of (5-10%) you will have to pay surrender charges and you will always have to pay taxes on any profits you made.

What Is a Deferred Annuity?

Deferred Annuities Explained

Deferred annuities mean that you are purchasing a contract and deferring income, payments or profits. Consequently, this is before you choose to do something with it. This may involve a stream of payments at a later date. Most noteworthy, most fixed and index annuities are deferred annuities.

A deferred annuity is a type of annuity contract that delays payments of income, installments, or a lump sum until the investor elects to receive them and the contract is out of surrender. This type of annuity has two main phases: the savings phase also called the accumulation phase. These can include Fixed Annuities and Index Annuities. The second phase is usually the income phase, if you want this or if you have purchased a rider. Deferred annuities are variable annuity, index annuity or fixed annuity.

A Flexible Premium vs. A Single Premium

Flexible premium annuities allow for multiple purchase payments, sometime this extents the term of the contract but the carriers we deal with will not extend the term of the index annuity. An example of this is if you purchased a 7 year index annuity and wanted to add money to it in 2 years, you would only have 5 years left for all the money, even the new money to be out of surrender. While a single premium annuity requires one lump-sum purchase payment.

Single-Premium Annuities

Purchase these with one lump-sum premium payment such as, 401(k) or IRA rollover. Some single-premium annuities do accept additional premiums during a short, specified time period at the beginning of the contract.