Understanding Annuities for My Financial Future

Understanding Annuities

There has never been a better time to invest in your financial future. There is a wide variety of strategies to generate income, protect your assets, and secure your retirement income stream. The cost of living is rising and life expectancy is simultaneously increasing for many adults. You may be wondering how to best create an investment strategy in order to not run out of money during retirement.

People want to make the most of their money but without the chance of losing it all.

That’s where annuity products come in.

What Is An Annuity?

An annuity is a contractual financial product sold by insurance companies. Annuities do two things:

To help people limit their risk and give them a better return than a CD,
Or they’re available to help you create a personal pension

Annuities then pay out a stream of payments to the individual at a later point in time.

There are a variety of different annuity products and benefits to each type. As investors seek options to shed risk and guarantee returns, annuities have grown in popularity. With deferred annuities, as well as various subsets, they offer a great balance of protection and reward.

The right annuity products are safe and will help secure your financial future.

How Does An Annuity Help Your Financial Future?

Annuities have changed over the years. While there used to be very limited products to choose from, all that is different now. Annuities can be tied to the performance of stock indexes and offer a wide variety of payout and tax benefits. Most annuities are tied to the S&P 500 but in recent years we have seen a lot of managed volatility indexes used in annuities.

Annuities are recommended as one of the best ways to boost your income when it comes to retirement planning. It is difficult to know how global politics, changing interest rates, real estate transactions and unemployment will affect investment returns. And most of us remember the major impact of the last financial crisis.The financial crisis is estimated to have had a total household wealth impact of over $19 trillion.

With that type of volatility in the market, an annuity is a safer alternative. You can have the benefit of your money growing without the risk of losing any principal. An annuity often guarantees a payout amount that is fixed. This amount can grow based on the performance of the index or stock fund it is tied to. In addition, there are tax benefits that will ease any uncertainty of the total income you can enjoy from your annuity products.

Are There Tax Benefits?

One of the best parts of an annuity is the tax protection it provides. The income payments that you receive can be taxed two ways:

Exclusion Ratio: If you annuitize the contract, you’ll have an exclusion ratio which will tell you how much is the return of principal and how much is interest on your money (the taxable amount). As an example, $1000 payments may have $900 of return of principle and $100 of interest.
LIFO (Last In First Out): Think of pouring rocks in a bucket. The last ones you put in are the first ones to come out. This is the same with an annuity with an income rider. You will pay tax on the income that you’ve earned first and then you will go into return of principle, paying nothing in tax for years until the account goes to zero. Once you get into the insurance companies pockets, it becomes 100% taxable again.

When you do begin to make withdrawals, the income will be taxed. The benefit in terms of retirement planning is that you can sleep better at night knowing that your basic needs will be met with annuity payments.

Annuities & Taxation

There are many different ways annuity payouts are taxed. You will want to understand your personal strategy and match that to the type of annuity you invest in.

For instance, you may want a lump sum or deferred payout. How these monies interact with your other investments and social security income will impact your tax liability down the road.

Like all investment strategies, there are winning ways to leverage annuity products in terms of your individual tax situation. A winning strategy can often include using after-tax dollars to fund your annuity. Understanding your tax and income goals will help you pick the right annuity or annuities for you.

There Are Different Types of Annuities

There are many different types of annuities from which to choose.

The two major types of annuities are deferred and immediate.

Deferred Annuities offer major growth opportunities

The upside to deferred annuities is that they help you set your money aside and let it grow. With a specific timeline when payoffs start your money will be growing as interest accrues.

Immediate Annuities start paying out in no more than 1 year

After you start paying your premium, Immediate Annuities go to work right away at generating payouts. They are often the perfect product for individuals who are close to retirement.

Annuity subsets offer variety

In addition, there are subsets of annuities that include Fixed and Fixed Index Annuities. With fair returns and minimal risk, Fixed Index Annuities are one of the most popular investment products.

There Are Two Distinct Phases of An Annuity

Just as there are different types of annuities, there are also different phases of annuities.

When it comes to building your financial future, you need to know the phase you are in personally, as well as the place your annuity can take you.

There is both the accumulation and the distribution phase in any annuity. Making sure you match your financial plans to the performance and structure of a particular annuity will remove any surprises.

Get The Best For Your Financial Future

Tired of low rates? Thinking it might be time to invest in an annuity?

Tennessee Annuity Rates can help.

We offer simple solutions for your situation.

We know that market risk isn’t for everyone. And we also know that everyone’s financial situation is unique.

We will help you find the best products and services for your unique situation. Don’t wait.

Contact Tennessee Annuity Rates now to receive a free consultation and makes the most of your financial future starting today.

Who Can You Trust With Your Money: FDIC Insured Banks Vs. Annuities

FDIC Vs. Insurance Providers: Are You Protected?

The federal government requires banks to keep 10% of your CD in reserves. 10 cents of every dollar you’ve deposited is in your banks reserves. This goes for money market accounts as well as any money that you put in your bank account. On the other hand, state insurance commissioners regulate annuities. This creates a major difference because insurance companies have to keep 100% of your annuity. That means 1 dollar for every dollar of your investment. According to Forbes, if you wanted to take your annuity out of the insurance company and liquidate that asset, you would walk away with the current value of the annuity plus the current value of future obligations on those contracts.

Breaking It Down: What Is The FDIC Good For?

The FDIC has a coverage limit of up to $250,000 per depositor, per insured bank. If you share an investment account with your spouse, however, you split that $250,000 insurance coverage limit 50/50. FDIC does not insure your money market accounts, CD’s, annuities, stocks, bonds and any other financial instruments.

Lehman Brothers and Bear Stearns closed their doors, causing an earthquake in investor confidence. And there’s no need to go into detail of how many high-end investors had their hopes of an ROI dashed from the Bernie Madoff scandal. Consequently, the Reserve Primary Fund temporarily ensured mutual funds. Your FDIC confidence extends only as far as your dedication to what we’ve always been told, no matter how much it actually protects you. Annuity protection, more often than not, exceeds the insurance limit of the FDIC.

The New Financial Trend That Has Investors Sleeping Easy

The FDIC covers up to $250,000 if banks go belly up. But what about our annuities? State laws govern what happens to your annuities after you insurance fails and goes into liquidation. In Florida, for instance, your annuity is insured up to $300,000 for each contract owner. Annuities are guaranteed in Florida far more than your bank’s FDIC insurance is able to guarantee your CD’s and money market account and other financial instruments. How? If you and your spouse each have a contract, you are both ensured up to $600,000 together, rather than the flat $250,000 insurance that the FDIC extends. With annuities, you can maximize your coverage by investing in an annuity from multiple insurance lenders.

See my blog on how much protection your annuities have state by state in case of litigation, bankruptcy or debt collectors and creditors.

7 Questions to Ask Before Buying an Annuity

What to Ask Before You Buy an Annuity

Many people reaching retirement are looking for ways to improve their financial security.

It is unsurprising that many people are considering buying an annuity.

If chosen well, an annuity can prevent a person from outliving their finances. What’s more, it can provide increased protection against a volatile stock market.

As annuity will convert current wealth into a steady income, it is vital to make an informed decision.

Also, as life insurance and annuity scams are on the rise, an investor should not rush into a plan.

So, it is important to ask yourself the following seven questions when buying an annuity.

1. What is the Annuity Process?

An annuity is a big financial commitment, so you must have a firm grasp of the process.

You will be buying an insurance product, so you will need to pay one lump sum or make a series of payments.

Once you have made the payment(s), your money will start to grow at either a fixed or variable interest rate.

The insurer will then make regular payments to your account for the rest of your life.

The insurance should also entitle your chosen beneficiary to the amount. Your loved one will either receive the annuity value or the guaranteed minimum, whichever is the greater amount.

The annuity contract is a big commitment. You’ll be unable to withdraw the money until you’re 59 1/2 years old.

If you do choose to withdraw the amount, you’ll experience a penalty of 10% on the lump sum. You may also have to pay a surrender fee.

2. What are the Different Types of Annuities?

Not all annuity contracts are the same. Deferred annuities may fall into 1 of 3 brackets: fixed, variable or equity-indexed.

Fixed annuities will provide a guaranteed rate of return for a select period. You may choose between one to ten years.

While the rates might be subject to fluctuation, you are guaranteed to receive the fixed rate.

It’s one way to ensure you will not lose any money, but you will not have any room to grow your finances.

Variable annuities offer a little more flexibility, so they can also be a little riskier.

The contract is not dissimilar to investing in a mutual fund. While there is a potential to enjoy financial growth, it can also result in the plummeting of the pot.

You’ll also, more than likely, pay higher fees. The beneficiary will also owe tax on the amount.

An equity-indexed annuity is a little like a fixed annuity, as you will receive a fixed payment.

The difference is a contract can provide room for financial growth, as it’s attached to an index.

3. How Many Annuities Should I Buy?

The annuity should provide a stable income that provides you with basic living needs.

Identify how much money you’ll spend on housing, utilities, food, and transportation. You should also factor in healthcare costs, too.

You could even opt for deferred Social Security claims, so this covers your basic needs.

The annuity could then provide a supplementary income. So you can buy vacations, gifts, or home improvements.

4. What Age Should I Start Buying an Annuity?

There is nothing wrong with planning for your retirement early.

Most annuities are often aimed at people in their 50s or 60s, as they are close to retirement age.

As well as your age, you should also take a look at the market before you buy an annuity.

Annuities often have a low-interest rate, so it’s best to take out a contract when interest rates jump.

However, don’t wait too long or you could end up with no stable source at all.

5. What is the Surrender Period?

Before you embark with an annuity contract, take a look at the surrender period.

This is the length of time you will have to keep the contract before you can make a withdrawal without surrender charges.

Most contracts provide a distribution level from 5 to 15% of the initial investment sum.

You can access this on an annual basis without a surrender fee.

Should you exceed the designated withdrawal sum, you will receive a 5 to 15% charge. This charge will most likely decrease the longer you have had the contract.

It is not uncommon for investors to become frustrated that they cannot access their cash.

That’s why it is important to remember an annuity is not a cash resource. It aims to provide financial security.

6. Will Annuity Benefit My Partner?

It’s natural for married couples to consider their partner when buying an annuity.

You might be glad to learn you can invest in the protection with your partner in mind.

Most reputable insurers will provide joint-and-survivor coverage. This will allow you to buy protection at a varying rate, which will be payable to a survivor.

You may be able to choose from 50%, 66% or 100%. What’s more, the initial annuity payments might be lower compared to single-life contracts.

The investment may offer peace of mind that a partner will have financial protection.

7. How Does Inflation Work?

The inflation rate will determine the amount of money you will receive.

Many people will often take out inflation protection when buying an annuity. This can increase the payments with the rate of the consumer price index or an annual set percentage.

Inflation protection isn’t cheap, though.

Compare the market expectation of inflation against the inflation protection cost.

If the market projects a 2% inflation rise, receive an SPIA quote that has an annual 2% set up. You can then compare it against the same income with an annuity adjusted for inflation.

You can then identify the protection markup against an unexpected inflation rise.

Conclusion

Buying an annuity should never be undertaken without making an informed choice.

It is a big financial decision that could impact your retirement years.

You must explore all avenues before making such a big commitment, or you may literally pay the price.

So, only contact reputable insurance providers and consider inflation with care.

You must also factor in your beneficiary or spouse to ensure they’re protected when you die.

Have you taken out an annuity contract? Do you have any advice to share? Leave a comment below.

Why Invest in Annuities? Because The Exclusion Ratios Means Tax-Exempt ROI

Why Invest in Annuities?

Exclusion ratios are tax-exempt portions of your annuity return. For example, each annuity payment you receive can be split into two distinct parts. The annuity investment capital is one portion. The other portion is an additional amount that is taxed at the current income rate. This portion is interest that you’ve earned. Consequently, it’s taxed as regular income would be. The capital portion of the return is not taxed. The return on capital, or the additional balance after the principal capital is subtracted, is taxed. This is because it’s considered part of the annuitant’s gross income.

What Is The Exclusion Ratio?

The exclusion ratio is a calculable ratio used to identify the portion payout that is excluded from taxable income. The exclusion ratio is the amount that the annuitant invested into the annuity divided by the return expected from the investment. Apply this exclusion ratio to each annuity payout. Now, identify the percentage of each return that is tax-free. Do not consider it part of gross income.

For example, say that an annuitant invests $158,000 into an annuity. The potential income stream based on life expectancy could be $264,000. The exclusion ratio would be $158,000 / $264,000, or 60%. The tax-exempt portion of a $1,250 per month payment would then be $750. The remaining $500 balance would be taxable as additional gross income.

Take the below as a more realistic representation of the exclusion ratio:

**This is strictly hypothetical. Any illustration you get from an advisor will show exact numbers.

What Is The Benefit of The Exclusion Ratio For The Annuitant?

You don’t need to add the tax-exempt return to your W2 or tax return during tax season. It’s completely exempt from gross income taxation.

Annuities calculate the payout based on the life expectancy of the annuitant. Consequently, requirements do apply for these types of investments. Use IRS tables to determine the total expected value. Different tax exempt rules apply to those annuitants who have retirement plans under the IRS public school employment laws which may allow the annuitant to have a greater amount of tax exemptions from an annuity.

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.

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?