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Immediate variable annuity As a good Retirement Plan

Variable annuity is usually classified according to when the investor wants to receive returns on his or her investment. There are two major types of variable annuity, the immediate variable annuity and deferred variable annuity.

In a deferred variable annuity, the individual receives a return on their investment at a later date and this type of variable annuity is subject to compounded growth as well as tax deferral during the accumulation stage.

In an immediate variable annuity, the paycheques start coming immediately. Sometimes within a month or a year depending on the periodic payment periods agreed between the investor and the insurance company. Therefore, the investor receives dividends on this type of variable annuity immediately after it is purchased, and the individual is guaranteed to receive the income for as he or she is alive.

In an immediate variable annuity plan, the investor usually makes a lump-sum deposit which is put in a portfolio and the investor can spread these funds across different assets. The investor can choose to purchase bonds or stock and they will get payments depending on the performance of their investment in that particular year.

The investor who opts for an immediate variable annuity instead of a deferred variable annuity has to let go of the possibility of compounded growth which is enjoyed in deferred variable annuity as they start receiving the funds immediately. They also start paying income tax on their withdrawal immediately because they start withdrawing funds as soon as they purchase the variable annuity, without allowing the funds to accumulate.

Immediate variable annuity carries a lot of potential risk because it is equity based. Therefore, the returns are usually different for the investor depending on the performance of their asset class in the money markets. If their investments performed well during a particular year, their accounts are likely to be more valuable meaning that they will get higher payments. However, if their investments perform poorly during the year, their accounts will reduce in value and ultimately, the payments that they receive will be less. Because withdrawals are not deferred, there is no ‘surrender charge’ in an immediate variable annuity for early withdrawals.

In immediate variable annuity, the investor is guaranteed an income for life and there is the potential that their investment will increase and their account will have a higher value with time. There is no possibility of the individual outliving their funds and they will receive monthly or yearly payments for the rest of their life.

This type of variable annuity is best for individuals who have already retired as they can start getting their funds immediately. They are also cushioned from the risk of investing over a long period of time, as accounts can lose significantly after a long time, though they can also gain significantly after a long period of time. The retirees can start getting a paycheque immediately, though the payment rate is dependent on the performance of their investment. It is important to read the details of the prospectus offered by the insurance company in order to know all the terms that apply to this type of variable annuity.

How Variable Annuities Work In Its Payout Phase

In a variable annuity, the individual makes either a lump-sum payment or a series of individual payments to an insurance company who then invests the money and pays the individual after an agreed period of time. The payments are usually made from at once or periodically depending on the agreement made between the individual and the insurance company at the time of purchase.

From this discussion, it is clear that the variable annuity has two phases. The first phase is known as the accumulation phase in which the individual pays the money at once or at different times and the money is invested and it begins to increase or decrease depending on the performance of the investment option.

The second phase of the variable annuity is known as the payout phase. In this phase, the individual receives the returns on their investments. This usually includes the initial purchase plus any interest that may have been gained during the accumulation phase. There are generally two options in the payout phase, and the first option is for the individual to receive all the money, that is, the initial purchase payment as well as any interest accrued at once as a lump-sum payment. The second option is for the individual to receive payments periodically after an agreed period of time and for most insurance companies; these payments are usually made after every month.

In the second option, there are also two choices available for the investor. These choices determine the total amount of time that you as the investor hope to receive the payments. You and the insurance company may come to an agreement that they will pay you your money plus interest over a specific period of time. For example, 30 years or indefinitely for as long as you or your beneficiary lives.

Payments may vary depending on what you agreed in the initial contract. You as the individual may choose to receive payments in this phase as fixed amounts each time or as varying amounts which are pegged on the performance of your investment. If you invested in stock, when the stocks are doing well you will receive more money. When the stocks are performing poorly, you will definitely lose.

The payout option that you choose will determine the amount that you get in each regular payment. It is important to read the terms and conditions of each insurance company as some will not permit you to make any withdrawals from your account once you start receiving payments for your variable annuity.

The payments in the payout phase of the variable annuity are usually taxed as income by the federal government and the insurance company may also have its own charges. It is important to read the policies of the insurance company as outlined in the prospectus in order to determine all the fees charged by the insurance company before you decide to invest with them. This is because these charges will also determine how much you get in terms of payments.

Calculating Future Values Of Annuity For Retirement

For every retiree or intending retiree, it is important to understand the intricacies of purchased annuity for retirement purposes. This way, you will be convinced of the investments you are deciding upon and the value to be gained in the future. In addition to the details in this article, you will have the opportunity to compare rates from several annuity providers within our network of leading insurance companies.

FUTURE VALUES (FV) OF ANNUITIES

Future values of annuities tend to be the most important information sought after by retirees and other investors. It tells them how much to expect at a later date based on the amount that has been invested today. Future values will differ slightly for the two major types of annuities under consideration which are the “ordinary annuity” and “annuity due”. For ordinary annuities, payments are usually required at the end of each period which can be a month, a quarter or at the end of a year. The reverse is the case for “annuities due” where payments are required at the beginning of each corresponding period.

Though we have free and reliable calculators which can give the information required by just punching in figures, we wish to let you understand how it works in order to be able to negotiate the best deal in the absence of an online calculator. For instance, if you were paying interests on a particular loan, calculating the future value will help you to determine the actual cost of the loan.

FV CALCULATION

With FV calculation, let’s assume that you are investing $1000 at 5% interest rate in an ordinary annuity at the end of each period, and then you will have had a minimum of $5525 as your investment balance after five years. This is due to the compounding effect of the closing balance on a yearly basis.

With this, every retiree investor can quickly do a mental calculation of what their investments will be worth after a specific number of years. It should also be noted that the original principal will be interest free, giving you the ability to calculate the exact amount that you will receive as payout depending on the number of years agreed upon with the annuity plan provider.

We also have other types of calculators for different types of annuity for retirement. There are calculators available for annuity planning and also those that can be used to calculate the present value of an annuity.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.

When And Why One Should Buy Immediate Annuity

The buyer of an immediate annuity is weighed by two major characteristics. Firstly, this buyer has great desire for a lifelong income on regular basis. Secondly, the individual is eager to start the payments sooner than later without taking any chances. Indeed, a retiree perfectly fits this bill. Such an individual is keen on having savings meant for retirement being converted into income for a lifetime. They simply do not want to run out of cash at any one given time. Retirees whose investments are comprised due to lack of financial security have no better option but this offer.

Actually, they may choose to invest proceeds of pensions or personal savings accumulated over time by purchasing an immediate annuity. Most employees on the verge of retiring usually have big investments in the stock of their companies. These individuals have great financial backing to enable them expand when they finally retire. By so doing, they timely minimize or avoid any possible threats to their income. Therefore, the safest and easiest way of taming any risk that may come by in securing an immediate annuity. At the same time, this decision will materialize into a guaranteed source of income during the retirement period.

Besides retirees, the need for immediate annuities is common among those who reap off from legal settlements, lawsuits inclusive. Usually, the terms dictate that payments should be made cover up lost income perceived to have been realized later, say several years to come. Furthermore, the lost income to be replaced is provided with the same surety as the legal system is able to deliver. Given such an order, nothing other than an immediate annuity rises to the occasion. It is suitably designed to address length and breadth of the matter at hand. The court therefore orders the defendant to buy an immediate annuity in funds enough to satisfy the damage claims presented by the plaintiff. This is enough proof that court cases calling for monetary settlements will be fully handled by this annuity package.

Enter your zip at the top of this page and check immediate annuity quotes for free.

People Who Might Need Fixed Annuity

Everyone is supposed to look into the future and know that he or she won’t be as economically active as when they are at the age of 35 years. It is for this reason that a lot of people have found it prudent to make some form of investment that will be trickling in some revenue when age catches up with them. Some will invest in rather risky places while others chose the more conservative investing grounds. But when looking at a retirement investment plan you should always check the risky bit because, assuming you invested in the so very risky put/call options in the stock exchange and you lost all your money, in the investment. If you are age 70, it simply means that you have lost it all because it will be rather hard to rejuvenate yourself and get that wealth at that age, but you never know because a new life can start anytime and anywhere. There are some factors that you should consider before investing in annuities.

It is always best to take up a fixed annuity at least ten to fifteen years before you retire. If you are retiring now at the age of 50 and thinking of taking up an annuity think of it when it matures in 20 years and you are 70 years. What will you are surviving on for those 20 years?

A fixed annuity is tailored to suit best those that have extra income to spare or can squeeze just a little to get the premiums required. An annuity should not be taken by someone with no savings or some source of income because when an emergency arises, you will surely be forced to cancel the annuity contract and it’s a rather expensive decision.

Every so often you can see that some people can tell that their economic future is not very bright though they are at its podium now. They decide to put some money in a  fixed annuity  and since you the money is not getting taxed as it accumulates and will only get taxed when you are withdrawing it serves as a perfect tax deferment way. They might further enjoy the annuity as they will be classified in a lower income bracket for tax purposes.

If you are worried or concerned about your future and you want a certain way to be having a steady guaranteed cash inflow then an annuity can just be the trick that you are looking for.

As we conclude you will agree with me that quite a large number of people have no patience or rather financial discipline, they will take up a fixed annuity that will mature after 10 or 15 years and diligently start making the required premiums. After one or two years they get impatient with the plan and withdraw from it. You should be aware that a surrender charge of up 25% of your investment can be charged. Therefore you should try as much as you can to just forget you have one and just continue paying the premiums.

Indexed Annuity vs Immediate Annuity – Weigh the Differences

In selecting what annuity type caters your needs and wants at the same time, you have to evaluate the options very carefully. Look at their similarities and weigh their differences so that at the end you will have no regrets in buying one.

Two annuity types are greatly considered when it comes in annuity buying. Prospective annuitants are torn between the choice of indexed annuity and immediate annuity. Which is the more appropriate one for you? Ponder on each type and consider weighing both of each first.

Indexed annuity is a kind of annuity that has payouts that are tied in financial index. Sometimes it is also known as equity-index annuity. This kind of annuity is designed especially for those clients who wish to own an annuity that gives payment based on interest rate of an equity index. The contract of this annuity guarantees an annuitant that the he or she will receive payments that is related to the positive return in the index. No matter what happens, the annuitant will still receive a fixed return from his or her principal payment.

Indexed annuity sounds confusing right? It is because indexed annuity is a meeting point of fixed annuities and variable annuities. The payments that the annuitants receive are based on a certain market index. This market index is most of time the S&P 500.

Indexed annuities have limitations also like some amounts that are credited may be capped, upside and downside. That means that if the upside cap is 8%, the account will only be credited 8% even if the S&P 500 rises beyond that. However, even if this is the case, many investors who are afraid of deflation choose indexed annuity because there are more probabilities that this kind of annuity could pay more over time.

On the other side, immediate annuity quotes offer annuitants an immediate payout not long after the purchase of the annuity. They can choose between immediate fixed annuity and immediate variable annuity. In immediate annuities, it is obvious that annuitants can choose to have their investments fixed or variable. Meaning, if an annuitant choose to have immediate variable annuity, the interest rate of his or her annuity can go down or low depending on the performance of the investment and stock market. If, on the other hand, he or she goes for immediate fixed annuity, the interest rate of his or her payment will not be affected by the ups and downs of investments and the investment company. The rate will be the same rate until the contract expires.

Immediate annuity quotes are also quite popular among retirees because of its features. If you want to buy an immediate annuity, you just have to pay a lump sum of money as a principal. This money could be taken from their retirement plans and funds such as the 401 (k).  This kind of annuity can also include beneficiaries in the annuitant’s account. The more beneficiaries the annuitant has, the lower payment he or she will receive each payout.

That being said, we can see that the indexed annuity and the immediate fixed annuity somehow look similar. It is because they are both fixed. An immediate annuity could either be fixed, variable or indexed. But, an indexed annuity does not necessarily need to be an immediate annuity.

Both of these annuities – the indexed annuity and immediate annuity aim to provide financial assistance and guarantees financial stability over a period of time. Both look and sound promising but it is important to consider and assess your own situation before buying one. Choose what you think is best for you.

The Basic Facts on Immediate Variable Annuity

ImmediateAnnuityImmediate variable annuity is one of the most popular annuity types nowadays. Now is the right time to take a glimpse of what it is before considering buying one.

There are two main types of immediate annuity. These are the immediate fixed annuity and the immediate variable annuity. Immediate fixed annuity and immediate variable annuity have similarities and differences, their disadvantages and advantages.

These two kinds of immediate annuity have similarities and differences in their immediate annuity quotes. Immediate fixed annuity gives off a flow of income to an annuitant without a change in the rate of return. The rate of return is fixed until the contract terminates. That is why this kind of immediate annuity is not flexible to inflations of stock market and investment performances. On the contrary, immediate variable annuity offers a stream of payment that will be modified throughout the payout period. The rates of these payments vary because of the subaccounts the annuity is tied with. These subaccounts underlying in the annuity invest in some market stock s or bond stocks.  Because of this, the rate can go high or low. Nonetheless, if the market performance goes high, the rate of return high likely will increase too.

Immediate variable annuity is a type of annuity that immediately pays out an annuitant with rates flexible to fluctuations. This kind of annuity may guarantee a lifelong income. The lump sum of money paid as the principal amount is placed in a portfolio where distributions of assets from different market stocks can occur.

Immediate variable annuity is most of the time equity-based. Meaning, the rates of income return to be paid out are tied to financial markets. By that situation, either the rate of return could be lower or it could be higher depending on the performance of the market. However, this kind of annuity generally yields higher income because of its tax deferral.

The immediate annuity quotes of this one state a combination of two features that cannot be easily dismissed by prospective buyers. First, a guaranteed lifetime income could be offered depending on the circumstances. Second, income increase may be potential due to market progress. For retirees, these features could be ideal for their situation.

This kind of annuity could be a good option for you if you are a retiree that desires a larger package for your retirement that includes growth for your income. The immediate variable annuity will supplement your needs in a daily basis with a non-guaranteed rate of return. The risk of getting lower rate of return is greater here but the possibility of getting an income growth is also higher.

You should also know that in buying immediate annuity quotes there are charges and fees you have to address eventually. At least learn the basics of some of it, if not all of it, so that you will be properly guided.

Immediate variable annuity has its own strengths and drawbacks just like any other type of annuity. It can really work out for you if this is really what you need and want. However, if this is not really, what you desire, there are more options available for you. You can choose deferred annuities if you want tax deferrals in your income until the withdrawal time. Fixed annuities like immediate fixed annuity can also be a good option for you if you are afraid to lose capital and ensure the fixed rate of income no matter what happens to the market.

Immediate Fixed Annuity – The Basics

An immediate annuity is a popular investment tool that allows you to turn the money you saved for retirement into retirement income through a secure way.

You pay the premium of your annuity contract to the insurance company. In return, they will provide you with a regular income for as long as you live or for a certain number of years, depending on the payout option you indicated in your annuity contract. You can choose to receive payments every month, every quarter, or every year. The immediate annuity, which is also referred to as the classic annuity, stretches the purchasing power or the value of the money that you had saved.

In insurance policies, underwriting questions are usually used by insurance companies in estimating the remaining number of years that the client still has to live. The client’s life expectancy will then be used to settle the amount of premium he/she has to pay for his/her insurance policy. The process is not the same with immediate annuities. In purchasing immediate annuities, questions about your personal health, medical history, and lifestyle, are not included. Thus, you have better odds in living longer than your life expectancy (that the insurance company estimated).

There are two basic types of immediate annuities – the variable and the fixed. Variable immediate annuities allow you to invest your money in the stock market. On the other hand, fixed immediate annuities allow you to guarantee a regular and stable source of income that can last for as long as you live no matter what happens to the economy or to the stock market. The latter type is the focus of this article.

The immediate fixed annuity may be a good option for conservative investors who do not want to risk their money in the stock market. If you cannot afford to lose your hard-earned money and if you are preparing for your retirement, this annuity could be one of the best annuity available for you.

The following are the basic features of an Immediate Fixed Annuity:

1. In non-qualified immediate fixed annuities, a portion of the monthly income is not subjected to taxation. On the other hand, income from qualified immediate annuities is subjected to taxation.

2. Unlike in other annuities in which you can give annual contributions to the insurance company until you have built up the complete cost of your contract, the premium in an immediate fixed annuity can be paid in one lump sum only.

3. It provides you with a definite regular income.

4. A long contract term will result to a lower annuity income. This is because the premium has to be stretched for several years. For example, if you want to receive income for twenty years, the income payout will be half the income you can receive if you choose to receive income for ten years only.

5. Income payout is proportional to your issuance age. Income payout is based on your life expectancy. If you are still young, (say, 40) it is assumed that you might still live for forty more years. Thus, you will receive a low-income payout because the insurance companies expect that they will give you income for forty more years. On the other hand, if you are already 60 years old, you will receive a higher income payout because your life expectancy is shorter. Note that in immediate annuities, annuity applicants should not be older than 90.

6. You can start withdrawing income from your account thirty days or a year after you have bought your annuity.

7. You can choose to receive payments for five years, ten years, fifteen years, twenty years, twenty-five years, thirty years, and for as long as you live.

Immediate Annuity Taxation – It’s All About Tax

Paying tax can be a burden to most people and investors. They think that instead of saving something for their own selves and businesses, some of their money are eaten up by taxes. Some of the people do not think highly of annuities too because they think that the principal they pay will not be fully returned to them in time. Well, the good news is, these down sides have silver lining. You can have a break paying tax in immediate annuities. Your money can be stacked in your account as your investment and for a time invisible for taxes. It will only be taxable when the withdrawal times occur. And even so, not all of it is taxable.

Let us break down the source of funds of immediate annuity into two – the qualified immediate annuity and the non-qualified immediate annuity. Qualified refers to the premium amount that are still qualified for the IRS exemption from income taxes. Non-qualified, on the other hand, is the one that have been purchased with the taxes being paid already. A part of the income is excluded from tax.

When you purchase a non-qualified immediate annuity, the amount paid to you is composed of two divisions. These are the principal and the interest. The principal is the one excluded from tax because it is a return of your initial investment. The interest is the one that taxed as an income.

Although annuities like immediate annuities present a tax break in your income, you should also be aware of some tax issues before buying immediate annuity quotes. Annuities start paying an annuitant after his or her retirement. If you happen to withdraw before the age of 59 1/2, you will receive a 10% penalty from the Internal Revenue Services (IRS). This penalty will be taken from the gain of the annuitant’s contract. It is a waste of money. Instead of avoiding tax, you end up paying more for it.

Also, if you get your income from a tax-qualified retirement plans like IRA and 401 (k), the benefits of being tax-deferred will not be enjoyed by you fully. You will not be gaining additional tax benefits aside from the benefits you are receiving from those plans. Tax-qualified retirement plans like these differ from immediate annuities in many ways like in the case of distributions, deductions, charges and death benefits.

The taxation of immediate annuities and any other annuities depends on the tax status of the money you use to buy an annuity. If it is taxable, then the income you will be receiving will be taxable too. If it is not, then a part of your income may be deferred from taxes.

When you ask an insurance company or any salesperson or agent for immediate annuity quotes, a statement of about the percentage of what is tax-free is indicated. You should really be critical about this since this will be the percentage of tax you will be dealing with if ever you choose to buy that kind of annuity they are advertising. When there is an opportunity to have a break from paying taxes, you might probably grab it immediately. There is nothing wrong with that as long as you take the right measure of precautions first.

Immediate Annuity Solution to Long Term Care

If you are thinking of investing in any kind of annuity for retirement, there is always the need for you to know some details about it.  Immediate annuity is one of the basic kinds of annuities you can invest in.  It can actually be the best solution to the long-term care you have been looking for. You need to know more about this investment option.

Actually, immediate annuity as a unique kind of annuity for retirement gives you the opportunity to turn the money you keep aside for retirement into profitable retirement income.  You simply enter into a contract with an insurance company by giving them a lump sum of your money, which is also known as the Premium.  In return, the company guarantees you a steady flow of income payments for a specified period agreed upon. It can be for your entire life or for several years into your retirement.

Unlike deferred annuity, the immediate annuity starts paying once you have made the initial investment.  It can actually be a solution to long-term care when it’s paying well.   It usually provides a secured way of receiving enough income from   your investment.  The income payments begin to flow in once you purchase the immediate annuity.

It’s good you know that purchasing the immediate annuity requires you present a one-time premium payment.  You can purchase a single immediate annuity premium with the funds you receive from IRAs, 401 (k) plans, Savings accounts, Real Estate and other sources.  You simply invest the money and then sit down to watch it work for you even while you sleep during your retirement period.

Once you have made the initial one-time premium investment, the insurance company guarantees you immediate payment on a monthly, quarterly, or yearly basis.  It all depends on the terms of the contract and how you want the payments to be made. You can choose to receive the payments monthly, quarterly,   or yearly. The choice is yours to make.  The first payment may begin in 30 days or after the first year.

You can use the income payments from immediate annuity for long-term care and other needs you may have. As a unique form of annuity for retirement,   the income payments you receive from immediate annuity can help you a great deal.   You can use the payments to take care of yourself all through the retirement period.  You can also use the payments to supplement your regular pension plans or social security   plans.

Really, immediate annuity can be a solution for long-term care only when you understand how it works.  In the first place, you need to enter into a binding contract with a good insurance company that offers this kind of annuity for retirement.  It’s good you know the details of the annuity including any other charge that may be involved.  If you are confused about the entire process of investing in the annuity, you can seek proper advice. Immediate annuity is never for everyone who is planning to retire. You really need to discover if the option can suit your retirement plan or not.