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Structured Settlement Annuity – Investment for your Future

As an investor who would like to plan for retirement, you may have studied various options, and locked down your interest to annuities. You may be wondering, what is annuity, and the various types of annuities that are available for you to invest in. An annuity gives you the option of investing your money after signing a contract with an insurance company, and getting payments after an agreed period of time.

One of the types of annuities is a structured settlement annuity, and the individual who asked what is annuity, may want to lock down their interests to this type of annuity. This type of annuity is reached upon after a court settlement, and the plaintiff is paid for a specific period of time after a lawsuit. The defendant who lost is the one who purchases this type of annuity, especially if the payment is to be made over a long period of time, especially if the payments are supposed to be paid for a duration that may exceed the defendants life time.

An individual who wants to know what is annuity should know that this option is available only to individuals after a court of law has ruled that they should be paid a certain amount of money, usually for the rest of their life. This is usually after an injury, especially in the work environment where the plaintiff may have been injured to the extent that they may not be able to work again. The injured party is assured of income for the rest of their life as a result, and this income is meant to help them with their daily expenses, as well as medical expenses that may be as a result of the major injury.

The individual who asked what is annuity may want to know what the advantage of such a settlement is, and the answer is that, like any other annuity, such a settlement is exempt from tax during the accumulation phase, and payment is guaranteed for the number of years determined by the court.

The individual who wants to know what is annuity could be advised that such a settlement could be requested by the plaintiff through their lawyer during trial, as a compensation for major injuries, and when granted, the defendant will be required to purchase annuity for the aggrieved party from an insurance company.

This type of settlement could also be reached upon outside the law courts with the hope that the individual will drop the charges. A defendant could ask the plaintiff to settle outside court by committing themselves to paying the individual a certain amount of money for a certain period of time through an insurance company in the form of annuities.

There are a lot of documents that need signing in a structured settlement annuity, especially considering that it is a legally binding agreement that is usually issued by a court of law or its representatives. However, it is a good way to compensate individuals who may have lost their means of livelihood due to a serious injury, and who may be faced with extra expenses due to hospital bills.

Safeguard your Future with Indexed Annuity

Annuity for retirement can safeguard your future retirement plan when you locate a good insurance company that can offer you the best options. There are various annuity options to choose.  Indexed annuity is certainly one of them. There’s a lot you’ll benefit when you know more about   it.

In the past, there are only two basic options for annuity for retirement. They include Fixed and Variable annuities.  People have always gone for either of the two. However in the early 1990’s, indexed annuity was introduced as a third option.  Ever since then, it has continued to gain wide recognition as many people keep going for it.

ImmediateAnnuityBasically, indexed annuity as a form of annuity for retirement is designed to mirror the performance of a specified or common index. It involves the tracking of a popular index.  When this is done, the owner of the index annuity can easily participate in the general market change. He or she is also able to track the status of the   values of the annuity.

In most cases,  insurance companies offering  index annuities as part of  annuity for retirement  usually specify   the participation rate which is the  level at which the    index annuity owners will be allowed to be in the market.

Usually, the participation rates are quoted in percentages.  The insurance company involved usually mitigates the downside risk.  Oftentimes, many insurance companies that offer indexed annuity usually state that the annuity owners will not receive less than the cash they deposited originally irrespective of how the index performs.  Some of the companies may even go further to ensure that the value of the indexed annuity will always increase by a minimum annual interest rate.

In most cases, increases in indexed annuities come with a spread. This is the difference between the amount credited and the annuity funds earned.  The spread in indexed annuities normally reflect in the statement issued by the insurance company and in the initial contract signed.

As a kind annuity for retirement, indexed annuity is tax deferred. You don’t have to pay any dime of tax until you make   your withdrawal.  The annuity is meant for   supplying income during retirement, hence, it’s usually held for long term.

From the above, it’s very clear that indexed annuity is somehow too technical. You need to pay close attention when going for it. There are some features to consider when thinking of choosing such an annuity for retirement purposes.  You need to consider the strong ratings. Here, you check the kind of guarantee and assurance the insurance company offers.

Again, you also need to consider the spreads. Check whether they are flexible or fixed. You have to also check the participation rates involved and discover whether they are higher or lower.  In most cases, higher participation rates pay better.  You have to also check the surrender period and make sure it lasts no longer than 12 years.  You need to also check the withdrawal status.  Free withdrawals are the ideal.  The death benefits involved should also be considered. When you check out all these points, you’re sure to succeed in locating a good insurer that can give you the best of options in indexed annuity.

Guaranteed Income Annuity – Less Investment Risk

Many individuals, especially those who are soon to retire, would like an investment that will guarantee them a regular income even after they have stopped working. For such investors, the question, what is annuity, always pops up. Annuity is an investment tool in which the investor enters into an agreement with an insurance company to purchase the annuity with the promise of being paid after an agreed period. The purchase could be made in one single payment or in a series of payments, and after that, withdrawals will be made depending on the agreement between the investor and the company.

Retirees like the prospect of guaranteed income after retirement, because they were already used to regular income before retirement. Guaranteed income annuity does not involve any investment risk or the possibility of loss of money due to the poor performance of stock or shares. The investor will always get the guaranteed amount of money over the years, without any interest growth or any decline due to the performance of the market.

The investor who would like to know what is annuity should be glad to know that a guaranteed income annuity is very safe as the income that they receive is assured, and the amount is the same at all times. There is no risk whatsoever, as the insurance company will be required to pay them the agreed amount regardless of what goes on in the money markets.

The investor who inquired what is annuity should also be advised that this type of annuity is not flexible at all, and the investor cannot make any changes to the agreement. The income that you and the insurance company agreed to at the time when you were signing the contract is the one that you will get for the agreed period, even if the markets improve drastically and a lot of money is gained on your investment.

This can be quite disadvantageous, and the investor could end up losing in the end, especially if there is a significant change in the market. However, they could gain if this significant change is negative, as they will still get the agreed income every time.

The investor inquiring what is annuity should therefore consider carefully before choosing such an annuity, and they should seek professional help before making such a decision. Guaranteed income annuity has a serious disadvantage, but it also has a serious advantage in that a retiree’s pension is converted into regular income, which they use just as they did before they retired. Therefore, the individual is guaranteed a salary for the rest of their life and this assures them financial safety in the end. It is also the best type of annuity for individuals who are not seeking any profits on their investment or who are not willing to take any risks with their money. Pension can easily be converted into a guaranteed income annuity and the investor will be able to enjoy the rest of their life after retirement without constantly monitoring the money markets and without any fear of loss or reduced income in later years.

Weighing the Difference between Fixed Annuity and Variable Annuity

Annuities are contracts normally issued by the insurance companies. They provide an individual person with a means of income. To receive the payments; you have to pay some lump sum amount of money to the insurance company. You will be paid out in periodic installments and where the payments starts immediately, it is referred to as the immediate annuity. It is a promise that insurance makes that it will offer periodic payments for a certain time to the purchaser of the annuity. They are sold as insurance products making them have the insurance like features.

In differed annuities, payments begin at a certain date in the future e.g at age 65 or 67 to be parallel with retirement. It gives the annuitant more payment. Periodic investments are made by the investors to build a large sum and after the buildup, payment begin. In simple terms differed annuities involves making periodic investments in order to have large sums and once the large sums are made, payments then begin. The fixed annuity and the variable annuity are a type of deferred annuity and in this article, we will try to differentiate them.

I know you are asking yourself about the difference between variable annuity and fixed annuity. Payments in the case of fixed annuity are fixed while in variable annuity it is dependent on investment performance that a certain annuity has. Fixed annuity is nearly the same as the defined benefit pension plan like social security while the variable annuities are nearly similar to the defined pension plan.

Fixed annuities are less risky while the variable annuities are very risky. If one is looking for a safer way of investing when it comes to annuities, then the fixed annuity is the best choice. A fixed annuity ensures that you have a guaranteed return at the end of every month. You are assured of a steady income with fixed annuities than in the case of variable annuities. What makes variable annuities risky is the fact that their investment portfolio usually is not stable.

They fluctuate with the market and it is difficult for one to have guaranteed monthly rates of return. One month you could be making a lot of money the next you could be making a lesser amount of money. You will only benefit from variable annuities only if your returns are high.  With variable annuities, you are not guaranteed. Stabilized income from investments is usually experienced with the fixed annuities and people who are in the work force and about to retire usually prefer them. This is because they offer one with an income on a regular interval.

A key feature for variable annuities is the separate accounts, which are usually separate from the general account for the insurance company. The gains, interests, losses and dividends are separate except the insurance company’s finances. Securities are held in a pooled form and that is why we have a separate account, which makes it similar to the mutual funds. In fixed annuity we have the general account.

Deferred Annuity – Investing for a Secured Future

Many insurance companies offer various investment options, and one of them is an annuity. Therefore, a typical day for an insurance agent may include a question such as what is annuity for an investor. The simple, clear answer is that it is a type of investment vehicle in which the investor enters into an agreement with the insurance company to pay a certain amount of money after which they will receive payments for certain duration of time, either immediately or after a certain amount of time.

You may also note that the investment may experience growth, and that there are not taxes until the investor starts withdrawing, after which the eyes of the investor who asked what is annuity will become brighter and wider as they ask to know more about this lucrative option. This option is known as a deferred annuity, and in this type of annuity, the investor pays either a lump sum or a series of payments to an insurance company and they agree to be paid after a certain period.

A deferred annuity is the best way to save your money so that you can use it in the future, and the individual could end up making a lot of money from this type of investment. At the end of the investment period, the investor could choose to withdraw some of the funds on a regular basis, or to receive all the money at a go.

In addition, the funds in a deferred annuity do not pay any tax during the accumulation stage, and one only starts paying income tax after they start withdrawing money from this annuity. This already sounds too good to be true, and the individual who asked what is annuity may be wondering whether there is a downside to this type of annuity.

In truth, there is always a downside to everything, and the disadvantage of this type of annuity is that the individual does not have the luxury of withdrawing the money before the agreed date. If they have to withdraw the money before the time has passed, they will be charged penalty fees, which will go on decreasing until the agreed amount of time lapses, after which the surrender charges will no longer apply. These fees vary from one company to another, and it is important for the potential investor to read the terms of a particular company before choosing to invest with them.

The individual who inquired what is annuity should also be informed that in a deferred annuity, they have the option of choosing between fixed annuities and variable annuities. In a fixed annuity, the rate of growth is fixed, while in a variable annuity, returns are dependent on the performance of subaccounts.

A deferred annuity is a great way for an investor to plan for years after retirement, the returns can be quite substantial, and the investor and insurance company can enter into an agreement so that the investor receives payments for the rest of their life. With such an explanation, the investor will definitely be sold.

How to Enjoy Deferred Annuities and their Features

Your retirement period comes to you as a dream even before you know what’s happening. There’s always the need to plan ahead of time in order to enjoy the retirement   period. It’s important you make the right income investment while you’re still in active service.  Annuity for retirement is one viable avenue that can guarantee steady flow of cash when you retire.  It showcases in specific kinds.  Deferred annuities are among the best options to go for.

Basically, a deferred annuity as a kind of annuity for retirement   is a contract that delays the payment of income until the investor   decides to go for it.  Many insurance companies offer this kind of annuity. You invest your lump sum of money and also allow the income to build up for a specified period of years.

There are two phases to deferred annuities.  The first is the savings phase whereby you’re expected to invest some cash into the deferred annuity account.  The second phase is the income phase whereby the plan is duly converted into an annuity giving you the room to receive payments.

Again, deferred annuities can be fixed or variable.   The fixed deferred annuity allows you to receive payment on a fixed date or period while the variable deferred annuity allows you to receive payment on variable date or period you may choose at any point in time.

One of the features you must not forget in deferred annuity is that you’re not to expect any payment until the given or agreed date comes.  You have to enter into a binding agreement with the   insurance company you’re dealing with and make sure you keep to the terms of the contract.

You stand to gain a lot when you go for a deferred annuity. As a unique kind of annuity for retirement, the annuity   helps you to accumulate a lot of cash all through the period of the contact.   In most cases, the accumulated income is tax-deferred. You’re not expected to pay any tax from the accumulated fund.   This helps you to have enough income for your retirement.

It’s often good to use a deferred annuity as a retirement savings accounts especially if you don’t want to lack enough cash when you retire.  You’ll always have enough money to eat and settle your bills during retirement. You can equally use the accumulated fund to invest in a real estate business opportunity.  You can easily purchase a befitting retirement home for yourself with the accumulated cash.

Meanwhile, there are other forms of deferred annuities you may need to check out. Among them include CD-Type deferred annuity, fixed deferred annuity, and Equity-index annuity and so on.  You can always get the right information about them from a reliable insurance company.  You don’t need to rush into purchasing any kind of annuity for retirement without making proper inquires.  In most cases, each type of annuity has its pros and cons. You need to know more about them before you decide to choose any of the options.

Annuity Glossary – Understanding Basic to Complex Terms

Annuity glossary will give you the most commonly used terms in annuities and other related financial products.

1035 Exchange: transfer of one annuity from one participant to another. Most people who choose to transfer their annuities are to get better rates and higher yields. This type of transfer is tax-free however; surrender fees may be applied in some cases.

401 (k) plan: this a retirement plan offered by employers to their employees. The employers make contributions to retirement plans. Often employers will match the contributions on a partial or full basis.

FindAnnuitiesAnnuitant: a person who buys annuities from insurance companies. Annuitants are expected to respect and follow all the terms and conditions that are stipulated in the annuity contract.

Annuity: Annuities are insurance products, which are offered by insurance companies. The term annuity refers to the payments or earnings that a person receives on a monthly or semiannual basis. When the original annuitant dies, the beneficiaries may take a part of the annuity.

Accrued interest: refers to the amount of interest that had eventually accrued since payment of most recent interest amount.

Actuary: the person who is an expert in statistical mathematics, which calculate premiums, pension, dividends and annuity rates.

Amortization: the decrease of debt on a gradual basis through monthly or semi quarterly payments that meet latest interest amounts. This should be paid on time to avoid late charges and penalty fees.

Anniversary Date: this is the annual date on which the annuity had started or had become effective.

Annuitization: the process of transferring the annuity into an income stream which are represented by regular payments for a definite period.

Annuity contract: a legal contract where annuitants enter. The contract stated the payments that an annuitant should pay on a specified time.

Annuity period: this is the period where the payments should be received. The annuity period are classified in monthly, quarterly, semi annually or annually.

Beneficiary: any person who receive benefits from annuity death benefit. When the original owner of the annuity dies, the beneficiary will receive a part of the annuity. However, beneficiaries cannot alter or change anything that is stipulated in the contract. They can receive befits but they are not allowed to change anything already stated in the contract.

Bond: bonds are form of debt that is created by institutions for those who wants to borrow money. Buyers of bonds will enjoy regular payments of interest. Most bonds are paid through a lump sum.

Bonus annuity: the bonus added by insurance companies to premium payments. Normally the rates for bonus annuity are between from one percent to five percent.

Certificate annuity: this type of annuity is equal to the guarantee period that is equal to surrender period.

Co-annuitant: co-owner of any original annuitant. The purpose of having a co-annuitant is to lengthen the contract of annuity. Consequently, both the original annuitant as well as the co-annuitant should die before the annuity to stop.

Deferred annuity: annuity is typically deferred. This means that as annuity, it will be not tax immediately because it will only be taxed upon withdrawal. The duration of annuity, usually last from seven to eight years. During withdrawal, a withdrawal tax up to thirty-six percent is charged.

Holding period:  the time when a participant holds ownership over policy plans, annuity contracts or other financial instruments.

Immediate annuity: this type of annuity allows each user to receive payout upon first payment of investment.

Joint annuitant: a person named in annuity contract. The life expectancy and age are some factors used to calculate annuities.

Life annuity: type of annuity that pays a set of standard and periodic basis as long as the annuitant is around.

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Annuity for Retirement: Advantages of Annuities

Annuity for retirement may be a good investment for those who wants to ensure they have a secured life, even after their retirement. If you really put an effort to plan, you can see that your retirement is probably the best period of your life. Now the question is how will you plan your future? Is the pension fund enough for your financial needs? Most retirees’ mistake is that they depend on the pension fund alone. This is very unsafe and may not enough for your own needs.

You have to get a wise investment as early as possible in order for you to have funds, which may cover all your needs for your retirement. The best investment that may yield a high interest and less risk is annuity.

How it Works?

There are several annuities in the market. It is an investment plan offered by insurance companies but directly handled by Securities Exchange Commission since it involves securities and bonds.

You may avail annuities by buying annuity from insurance company, which then the insurance companies will reinvest your money into diversified funds like securities or bonds. You may choose which type of annuity you prefer; you may choose whether you want a deferred annuity or immediate annuity. However, whatever you choose, it is important that you know that annuities are beneficial for you.

Advantages of Annuities

Annuities are much preferred by the majority of people because of its benefits. Annuity is an investment instrument that is tax deferred. Tax deferred means that your investment is not taxed every time you make a deposit. With annuities, you will only be taxed when you withdraw and since withdrawal is normally done after seven to eight years, you will only be taxed during that time for your withdrawal.

Secondly, annuities are principal protected. This means that you or your heirs will receive the amount of money that you have invested without any deductions. Whatever happens to the market whether it goes up or slums down, you are guaranteed to get your principal money unscathed, thus, making this a favorite for those people who want less risk.

Thirdly, annuities are inflation protected. This means that you can personalize your savings to make sure your investment will be able to keep up with your living conditions. We all know that inflation can devaluate your investment but with annuities, you may be guaranteed that your savings is protected.

Lastly, annuities are a lifelong income. You will receive money as long as you live. Unlike other investment which will only be around for a couple of years or if the plan holder dies, with annuities, the investor can enjoy the money he or she deposited as long as the annuitant is around. If the annuitant dies unexpectedly, the heir will receive a minimum of the investment.

Annuity for retirement is one of the recommended investments for retirees or anyone planning to invest for their retirement due to its minimal risk.

Is Variable Annuity for You?

A specific financial agreement where there is a minimum, guaranteed payout from the annuity provider and a varying payout depending on market performance can be called variable annuity. This market performance element refers to stocks and other bonds where their performance in the market determines the rates of return and total income of the investor. The tax-deferred nature of such an investment makes it a viable one as well.

For a clever investor, it will always be the first choice in spite of so many other annuity plans like the Equity Indexed Annuity. Firstly, there is a great chance of sudden windfalls but this advantage does not come without any hurdles. One has to thoroughly study the market conditions and also gather information about the insurance firm with which he/she plans to deal with. Secondly, there is this huge advantage of passing on the annuity to the one’s heir, i.e child or spouse in case if his/her death, something that is not possible in the cases of Fixed Annuity schemes. In case of death or decease, the family or heir usually gets the full amount in the deceased’s account or in some cases, gets a specific yet assured portion of the same.

It has some disadvantages too. Returns and their rates are hugely dependent on stocks and other market fluctuations and this intensifies the risk level.

There are innumerable surcharge payments that you may have to make if you opt for such a plan. This has no connection at all to the value of your investment. Charges for surrender, mortality charges, expense risk fees and other administrative deductions are liable to be paid by the investor.

Taking into account all the benefits and disadvantages, you might consider going ahead and investing in a variable annuity plan especially if you want a bigger share in the stock market without much direct risk or involvement.

Investing in Variable Annuity – Top Considerations

There are a lot of advantages for the investor who purchases a variable annuity, though there are a lot of risks associated with it as well. It is therefore advisable for the individual to ask as many questions as possible about this type of investment before choosing to purchase it.

Most insurance company usually give investors a period of up to ten days within which they can terminate their contract if they do not think that the terms are favorable. Withdrawals can be made within this period without any surrender charges being imposed on the withdrawals. It is important to check the terms and policies carefully within this period, because after it ends, you will not be able to make any withdrawals without paying a fee.

It is important to know that a variable annuity is best for individuals who intend to save in the long term, as they will not pay taxes during the accumulation fees and their investment will experience compounded growth. It is also important to know that there is the possibility that your account will decrease in value in the event that your investment does not perform well.

It is important to familiarize all the features as well as any variable annuity charges and fees by your insurance company and it is important to know all the advantages and disadvantages. After this, you should evaluate whether the advantages outweigh the disadvantages and whether purchasing the variable annuity will be worth the risk.

Before purchasing a deferred variable annuity, it is important to evaluate your finances so as to ensure that you will be able to last throughout the accumulation phase without withdrawing a single cent from your account. This is because, if you make any withdrawals, you will pay a surrender charge.

Before you settle for an insurance company, it is important to evaluate their bonuses together with the charges for these benefits, and to consider whether the bonus is worth it. You should speak with a professional who understands annuities better so that they can advise you on any consequences of purchasing a variable annuity, as well as the taxes that will be charged on the annuity upon withdrawal.

You should also know what the conditions for exchanging an annuity for a different one and whether there are any fees as well as benefits.

Different insurance companies have different terms and conditions for purchasing a variable annuity, and it is important for the investor to shop around before settling on a particular insurance company. The details of the variable annuity are usually contained in the prospectus, and the investor should read carefully through each prospectus, and ask questions where they do not understand. They can seek the help of a professional who can be able to explain some of the terms as well as some of the hidden charges and calculations. It is only after a critical analysis of these issues that the individual should choose to purchase a variable annuity, as there are consequences for backing out before the agreed time has lapsed.