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Frequently Asked Questions about Annuity, Answered

Knowing what is annuity will help you a lot in life.  You can enjoy steady flow of income when you retire with lots of viable annuity investments. Annuity can always be your income generator if it’s working in your favor. You need to be properly informed about what it is in order to gain more from every aspect of it.

There are several frequently asked questions regarding what is annuity.  People are always on the look out to search for pieces of information that will help them know more about the subject.  Discussed below are some of the common questions and their possible answers.

•             Is Annuity meant for Retirement purposes?

Sure, annuity is meant for retirement purposes but it’s not limited to that. You can invest in an annuity just to make sure you have steady flow of income when you retire. You can equally invest in annuity for other long term needs.  You’re sure of gaining a lot when you invest wisely.

•             What are the basic kinds of Annuities?

There are basically 4 types of annuities. They include variable annuity, equity index annuity, fixed annuity and lifetime annuity.  Each type is very unique.  Each type also has its pros and cons. You need to study the details of each type before thinking of making any choice.

•             What are the Categories of Annuities

There are two categories of annuities in use. They include immediate annuity and deferred annuity.  These 2 categories are seen in fixed annuity, equity index annuity and variable annuity.    In most cases, immediate annuity allows you to receive income payments right from the first month when you make your initial purchase payment. On the other hand, deferred annuity allows you to receive income payments on a future long date. Your investment is allowed to grow and mature before the withdrawal date.

•             Are there Charges in Annuities?

Sure! There are charges associated with annuities.  Among them include surrender charges, administrative fees and other charges.  There are also hidden charges.   In most cases, the charges depend on the kind of annuity you’re going for. They also depend on the kind of insurance company you’re using. You need to make proper inquiries before picking the right annuity that can help.

•             Are there terms and conditions in annuities?

Yes! There are terms and conditions involved in most annuities.  Basically, annuity is a contract you sign with an insurance company. Hence, there must be terms and conditions that bind you and the company. There’s always the need to go through the terms and conditions before you sign any contract deal with any insurance company.

The above are the frequently asked questions concerning what is annuity. There are still other pertinent questions which are mainly for private consumption.  If for any reason you’re confused about the right kind of annuity to go for, you can seek proper help from a financial adviser. A reliable insurance agent can also show you the right step to take.  You need to take time to locate the right insurance company to work with.

Getting to Know More about Annuity

The question “What is annuity” can only be answered by taking a look at the details of what the topic stands for.  You need to be properly informed in order to benefit a lot from the subject matter.

FindAnnuitiesIn a layman’s language, annuity refers to a contract you sign with an insurance company with the view of meeting your retirement needs.  It can also be for the need of other long-range goals which you may have.  Usually, you’re required to make a lump-sum payment.  You may also be required to pay series of payment depending on the conditions on ground.   In return to your investment, the insurance company agrees to pay you the dividends or income at an agreed date.  The income payments may be made monthly, yearly, or at a future date which you’ll agree upon.

Annuities are mainly of 3 types namely, indexed, variable and fixed annuity.  You need to explore these types in order to know which one to invest in.  In a fixed annuity, your insurer agrees to pay you no less than specified rates of interest during the period when your account is still on.  You’ll enter into agreement with the insurance company to pay you a specified amount on a fixed date.  In most cases, the fixed date may be in 10 to 20 years time. It can also be a lifetime stuff that may even be transferred to your beneficiary when you die.

Indexed annuity has a unique feature as well.  Your insurer will credit you with the return that is solely based on various changes showing on an index.  In most cases, the contract value in indexed annuity is usually less than a specified minimum irrespective of the performance of the index.

Variable annuity on its own also has its special feature.   You simply choose to invest on a variety of options such as bonds, stocks and mutual funds.  Your insurer will then be paying you according to the performance of your investments. Payments may be made monthly or at a future date. You can decide to go for immediate variable annuity or deferred variable annuity.   You get immediate monthly payments when you go for immediate variable annuity while you get payments at a deferred longtime date when you go for deferred variable annuity.

In most cases, SEC regulates variable annuities as securities. Indexed annuities may or may not be regulated securities since many of them are not registered with SEC.  The same scenario applies to fixed annuities. They are not registered with SEC and hence can’t be regulated.

In any case, what is annuity as seen above is all about knowing the details of the various annuity types involved.  You don’t need to jump into signing any contract with any insurance company you see. There’s always the need to make proper inquiries about what is annuity and how various insurance companies offer it.  This will help you to make the right choice when you decide to invest into annuities.

What Is Annuity – Understanding your Investment

The years before retirement may be plentiful, and the years after retirement may be uncertain. The only way to bring a balance between all these years is to foresee the drier years after retirement and prepare for them by investing wisely. One of the ways of doing this is by investing in annuities.

One may ask, what is annuity? Annuity is a type of agreement that an investor enters with a company, mostly an insurance company, and the main purpose of it is usually to ensure that the retirement days are financially secure and other long term goals are met.

An individual who asks what is annuity may also want to know how it works. The investor has an option to either deposit all the money at once or to pay it in premiums, and the insurer will then pay the investor at regular intervals either starting immediately or in the future.

Another question that an individual who inquired what is annuity may ask is whether there are any advantages to this form of investment. One of the benefits that are shared across the board with all types of annuities is the fact that the investment as well as any income earned before withdrawal is not taxed. Also, in case of the unfortunate circumstances of the death of the investor, a beneficiary may receive payments for the duration of their life, or as per the agreement in the contract.

The investor who asked what is annuity may also be interested in knowing whether there are different types of annuities to meet their investor requirements. The answer to this question is yes, there are. There are three main types of annuities, that is, fixed annuity, indexed annuity and variable annuity. In each, the investor will give you the payments as agreed, but the payments may vary across these options.

In a fixed annuity, a certain minimum is agreed upon during the years of investment, regardless of how the markets performed, in a variable annuity, payments are made depending on the performance of the investments or sub-accounts, while in indexed annuities, payments are determined by a certain index, though there is also a minimum guaranteed payment.

Of the three types of annuities, the variable annuity is considered as a security and is therefore managed by the SEC, while an indexed annuity may or may not be manage by the SEC. however, fixed annuity is not considered a security at all, and for this reason, the payments are not managed or regulated by this government body.

Annuities are a reliable investment tool for individuals who want to make their retirement years less uncertain. Individuals who are not afraid of a little risk may prefer to invest in variable annuity, while those who want set payments every month may prefer a fixed annuity. Whichever type of annuity you prefer, the bottom line is that you safeguard your future or prepare for goals in the future by investing in a retirement vehicle like annuities. There is a lot to consider, but in the end it will benefit you or your beneficiary during those days.

What is a 1035 Exchange?

1035 Exchange is related to tax code which allows the direct transfer or exchange of same or similar insurance products, endowment policy or annuities to another type of insurance, endowment policy or annuity. The main purpose of the transfer is to avoid payment of taxes that may be due when the owner finally redeems the financial product.

The name 1035 exchange comes from provision of Section 1035 of the IRS code where the rules of 1035 are based. Ordinarily, any exchange of financial product will need tax payments but the ruling of 1035 exchange allows people to have an exchange without generating any taxes. However, customers are advised to study first if their financial products are under the classification and passed the criteria of the rules of IRS.

There are several purposes why people choose to exchange. First, it removes the source of ineffectiveness by giving the consumers the chance to exchange their assets without any taxation.

Second, it boosts the services and goods of insurance companies, which sells financial products. Insurance companies will try to outshine each other by giving the best products to the market since it will not be a good idea for them if the consumer decides to exchange their investment to another insurance product. Typically, consumers decide to exchange their investment instruments to another product but with the same company. However, exchanging it to another investment instrument to another company may not be a good sign since it means that the insurance company is not giving a good service.

In addition, another competitive offering from other insurance company may also offer better investment, which can be higher than the existing one. If the financial strength of existing policy, endowment or annuity is not that stable, the plan holder may decide to transfer it to another company which is more stable.

For tax purposes, the existing insurance company will give the needed information to compute the taxes involved when the consumer decides to transfer and withdraw any cash to the newer company.

Verification Process

The exchange to the newer company is generally easy as long as the verification process is approved. The verification process only involves proper identification and that the owner of the existing policy remains the same. The terms as well the policy owner should stay the same to get approval. Changes in any of the name or terms may get rejection for the exchange.

Characteristics of 1035

 1035 Exchange is approved when the products to be exchange are the similar kind of assets. If you have existing life insurance, you can only transfer it to another life insurance to another company if it follows the same terms.

If you have, an existing endowment policy and you can only transfer it to another endowment, the same way with annuity. Exchange of the same type of annuity is allowed if you will exchange it to another annuity. You cannot exchange it to another type of annuity if they are not the same.

The exchange is also approved as long as the insurance products are not non-qualifying. They must not hold inside a tax advantage plan like 401(k) or IRA.

In the end, there are so many annuities offered in the market, you need to be careful in choosing which type of annuity is for you. However, if you find that your existing annuity is not secured in existing company, you may decide to transfer it to another more stable.

To get the highest eligible and stable rate, enter your ZIP at the top of this page and answer to some basic questions. Answering the question will allow you to receive free quote from our multiple providers with different rates depending on your individual circumstance and situation.

Why You Should Have Immediate Annuity

Retirement plans are designed in order to support you financially after your retirement and to let you be independent in that phase of life when you are in need of a stable source of income to meet your expenses. There are various types of retirement annuity plans available in the market. The insurance companies offer different benefits on various annuity plans.

There are fixed deferred annuity plan which secure you a stable immediate annuity quote at a regular basis because the principal money invested is used by the insurance company to invest in low risk government bonds and securities. Variable annuity plans offer a high rate of interest but the pay is irregular. Equity indexed annuity combines the benefit of both the plans. The rate of return guaranteed by the insurance company on different policies is called annuity quotes.

ImmediateAnnuityImmediate annuity quote is the index which you have to compare in order to select a suitable plan as your annuity scheme for retirement in case of an immediate annuity quote opted. Immediate annuity is that type of an annuity plan which starts paying out after a fixed annuity period of a month or a year which varies according to the terms of the policy. Additions of death benefits, protection against inflation are things to be considered. Immediate annuity pays you lump sum money as part of a financial arrangement during the life of the policy agreement. Immediate annuity is a safe investment which will support you in your life after retirement.

Some factors involved in determining immediate annuity quote are the market condition, inflation rate and Government monetary policy. The immediate annuity quote is state specific so you need to know whether the scheme is operating in your state or not. State Insurance Commission is a Government body that regulates the insurance companies and thereby influences the annuity plans designed by the insurance companies. If you compare the merits and demerits of annuity plans you’ll find for yourself which suits you best. Immediate annuity quote plays an important role in deciding the annuity plan. Fixed deferred annuity plan gives you a low rate of interest where the focus is primarily on safety of the principal amount and variable annuity is irregular and but pays you high rate of interest on your capital. Thus immediate annuity plan which is also called ‘Single premium Immediate annuity’ is what you may opt if you require a good sum of money post-retirement.

Compare all annuity providers and decide on the best rates for yourself for free! You simply need to enter your zip and then answer just a few basic questions!

Is the Performance of your Fixed Annuity Worth the Investment

It would be incorrect for anyone to put his money in any investment without doing some research. You need to ensure that you will not loose your principal amount and have an assurance of making some extra money. Therefore, how have fixed annuities been performing in the past and how good are they?

For starters, you need to know how the investment schemes work. They are fixed types of life insurance contracts with some benefits over the common life insurance. In this case, you pay some principal amount and then later, you start receiving periodic payments. Moreover, your principal will earn interest for you. These investments are referred to as fixed because they will assure you of a minimum interest rate, which can change after every year.

Actually, these interest rates will be in the range of between one and three per cent, which is much more than investments in bank CDs or even money markets. What is more, you do not have to stress yourself by strategizing on how to make money from your interest. Your custodian for the fixed annuity will take care of such issues. These fixed rates are usually independent of stock market’s performance. This may be a good thing because predicting how a market will perform is hard and in other situations, it surprises everyone including the expert traders.

However, these annuities have performed much better than stock markets for the last twelve years. However, financial advisors usually point out that for you to make money in these markets, you need to make long-term investments of at least five years ranging up to fifteen years. However, there are occasions during which investments of less than five years but more than two may do better than bank CDs.

Another great reason that should make you invest in these schemes is the absence of taxes on interests earned before your withdrawal time. This means that the money that was supposed to be taxes adds to your principal amount. Actually, after some calculations these deferrals end up being 45% of the taxes earned. This is a lot of money. It is unlikely that you get this advantage from CDs, savings accounts or money accounts.

Irrespective of the insurance firm that you use, you will never loose your principal money. This is despite any poor performance of stock markets. Actually, these market variations are the ones that make insurers to change the assured minimum interest rates for your fixed annuity.  This rate holds even when market rates are resulting in losses. However, when markets perform much better than your assured rates, you might not get all the earned money. Financial institutions usually place an upper limit for your interests. Well, this is fair considering that you will still make some money during tough times and you never loss any part of your principal.

Actually, when choosing the insurer whom you will invest in, consider the participation rate. It defines the amount of your principal that will earn interest rates of the improving stock market. Most participation rates will range from about forty per cent to 100%. However, these rates may change after some time but your financial institution will always alert you about these changes.

These advantages are quite impressive and you could be wondering how much you can invest in such annuity schemes. Well, you do not have limits on your investments. This feature is also a very important, which will not be available from other investments

For more info on annuities, simply enter your zip code at the top of this page and you’ll receive free and immediate quotes.

A Further Look at Equity Index Annuity

Equity Index Annuity is one of the major kinds to check out. You can benefit a lot from that when you’re properly informed. Actually, equity index annuity is simply a combination of fixed and variable annuities. It’s meant to give you the best from variable and fixed annuities. The equity index annuity usually comes with guaranteed return that normally makes it profitable when the investment is doing very fine.  In most cases, the return is determined by the actual performance of the benchmark index.

There are advantages and disadvantages that come with Equity index annuity. You need to be properly informed about them as you explore what is annuity. When it comes to the advantages, you’ll discover that equity index annuity will help you to participate in the upside position when the stock market is doing well. You’ll simply enjoy enough gain if the market is rising exponentially.  You also have the chance to guard against losses when the market begins to fall.  You have the benefit of receiving higher returns through equity index annuity than when you go for standard fixed annuity.  There are always fewer risks to tackle in such investment.

When it comes to the disadvantages, you still need to know the truth. The fact is that equity index annuity is usually very technical and complex. Its complex nature requires   enough time for someone to comprehend. If you’re not an expert in the financial market, you may find it very difficult to know what’s going on with the investment.  The technicalities involved in equity index annuity are too much. You’ll always need to get them interpreted before you’ll know the next step to take.

The complex nature of this kind of annuity always scares investors away. You might decide to go for other kinds of annuities you can easily understand.  Sometimes, equity index annuity is found not to be matching the entire return of the market index attached to it. The gains are usually calculated in a variety of ways by the experts involved. This also makes everything more complex. If you’re not well informed, you might even be confused about the entire process.

Again, there are some fees involved in equity index annuity.  You’ll get to pay surrender charges, administrative fees and some other hidden charges. However, this depends on the   insurance company you’re dealing with.

There’s always the need to know if equity index annuity is good for you or not. This is what you should concentrate on when looking at what is annuity. You must begin by making proper inquiries before you take any other step. Find out what your insurer is offering before you sign any contract.  If for any reason you’re confused, you don’t need to act further. A good financial expert   can help you make the right choice. All you need is to make the proper contact.

Your Complete Guide on How to Get Stock Market Growth with No Market Risk

Getting stock market growth with no market risk is very possible.  All you need is locate the right steps to take.  You need to explore more about annuity for retirement in order to succeed in getting the stock market growth with no market risk.  You may be wondering how.  Well, just keep reading!

Sure, it’s possible to own an annuity for retirement that locks in stock market gains even when the market is rising and growing in leaps and bounds. You also need the annuity to protect your investment against losses when the stock market fails.   What you need to do is to invest in the right kind of annuity that can handle such scenarios.  You simply need to invest in Equity Indexed Annuity.

RetirementInvestmentIndeed, Equity Indexed Annuity is a form of annuity for retirement that can help you   benefit from stock market growth with no market risk. With such an annuity, the return you’ll make is tied to the increases in one of the several stock market indexes.  This protects you from   the risks that are associated with the stock market.

If the stock market goes down, you won’t lose any money provided you’ve invested in the Equity indexed annuity.  In most cases, Equity indexed annuities guarantee   minimum annual return of about 3%. This applies even when the index you’ve invested in goes down at the time of the investment.  You’ll always be protected from the risks involved with the stock market.

Indeed, the Equity indexed annuity, as a form of annuity for retirement is a unique investment opportunity you can always benefit from.  The annuity has the capability of protecting the money you’ve saved in money market accounts, CD’s, IRA accounts and so on.  It also serves as a unique alternative for the money you invest in mutual funds and stocks.

Again, you can easily improve your earnings ability when you invest in Equity-indexed annuity.  At the same time it helps in keeping your principal investments safe from the regular market fluctuations associated with the stock market.

Meanwhile, Equity-indexed annuities are also very good for individuals who already have other kinds of annuities that are dropping in their interest rates. Such people can always cover the lost grounds when they invest in Equity-indexed annuities at the same time.

From the above, it’s very clear that Equity-indexed annuity may be the best option to go for if you’re thinking of enjoying stock market growth with no market risk.  However, you don’t just invest in this kind of annuity without making proper inquiries.  You need to be properly guided when thinking of going for the option. A good financial adviser can help   you a lot in offering the right pieces of advice you may need before going for any kind of annuity for retirement.  Never try to choose any of the annuities by yourself without knowing your   financial capacity and other needs. You may lose your hard-earned money if you fail to seek for proper guidance.  Your future retirement can be adequately secured when you take the right steps towards ensuring steady flow of income.

The Pros and Cons of Equity Index Annuity

Annuity for retirement prepares you for the battle ahead when you finally retire from active service.  Several insurance companies in the US offer all forms of retirement annuities for numerous individuals who are planning to enjoy their retirement periods.  The equity index annuity is indeed one of the basic options. You have to know more about it.

In simple terms, equity index annuity displays as a unique combination of variable and a fixed annuities.  The equity annuity is designed to give you the best of the fixed and variable annuities.  It comes with guaranteed return feature that makes it very profitable.  However, the return is very much determined by the performance of the benchmark index. Here are the pros and cons of equity index annuity.

The Pros

As unique form of annuity for retirement, equity index annuity helps you to participate in the upside position when the stock marketing is on the rising side.  You can as well protect yourself against the downside since you’re sure of earning a guaranteed minimum return even when the prices of stocks keep falling.

Equity index annuity also has the propensity of paying higher returns than ordinary standard fixed annuity.  It also has lesser risks that a variable annuity.

The Cons

As unique form of annuity for retirement, equity index annuity can be very complex and technical.  It has a very complicated nature that may require sometime for you to understand.  It also comes in a variety of forms. This further complicates its features.  In most cases, investors find it very difficult to understand the processes involved. Many investors always decide to go for other forms of annuity for retirement, which they can easily comprehend and follow.

Again, equity index annuity doesn’t actually match the entire return of the market index it’s attached to.  The various equity index annuities calculate the gains involved in divers ways.  This further complicates issues.

There are also certain fees involved in equity index annuity. There are surrender charges and other hidden fees.  In most cases, such fees depend on the insurance company you’re dealing with.  Some index annuities charges are up to 20% and they can run for   15 years and above. Thus, you may not have express access to your money without paying the heavy charges for a long period.

How to know if Equity Index annuity if right for you

You can easily discover if equity index annuity is the right annuity for retirement that can pay you.  You can consider going for it if you want to reap market returns without taking on the volatility and the risk of the stock market. Again, you can always discover if the equity annuity is right for you by making proper inquiries.  You need to go through the various offers coming from insurance companies that offer annuity for retirement.  You also need to go through the various terms and conditions involved.  Getting useful pieces of advice from a reliable financial adviser can also be of help. You’ll always gain a lot when you’re properly tutored on the pros and cons of the equity index annuity.

Annuity for Retirement: Pros and Cons of Equity Index Annuity

Annuity is one of the best options for retirees who wish to continue living a good life after their retirement. There are so many types of annuity for retirement but one of the most popular is equity index annuity. Equity index annuity earns interest through stocks and several other equity indexes. The most common index is S & P 500.

There are other annuities in the financial market but what makes equity index annuity very different is how credit interest is applied to your annuity. Ideally, the credit interests for fixed annuities are set depending on the assigned rate stipulated in your contract. However, with equity index annuity, the interest rate is credited by using a formula based index changes.

What makes equity index annuity profitable is when the fixed annuities earn an interest. By default, your annuity will earn a minimum interest rate. The minimum interest rate is given regardless the performance of your money in the index. Likewise, the value of your annuity will not drop below what is written in your contract.  If your contract stipulates that you will receive a minimum of ninety percent interest rate in addition to the 2% annual interest, then, your annuity will receive that interest even if your index interest rate is lowered in its market performance.

Pros and Cons of Equity Index annuity

The number one advantage is the locked in feature of the interest rate. Most investment instruments out there are affected by the market performance. You may lose a chunk of money when the investment goes awry but with equity index, you are guaranteed that the interest rate is locked and will be credited to your annuity.

Another benefit of equity index annuity for retirement is the annual reset feature of the annuity. Meaning, your annuity will not lose the interest that you already earned in the past because with annual reset, your annuity is protected in contrast to the market changes each year. With this feature, you can keep the interest to your investment that you received annually and each year is different from the others.

Index equity is calculated on the formula based structure. The common formula used is the highest value of the index during each term. This process allows the annuitant to earn much more than in any other investment funds.

However, like other investment funds, index equity may also have some disadvantages. The most common disadvantage is that it is long-term investment. You may not be able earn if you withdraw your money before seven to eight years. The most ideal is to let your index annuity to stay for more than ten  years to make the most of your investment but if you want an instant cash, then, index annuity may not be ideal for you.

Features of Equity Index Annuity

Equity index annuity has cap limit on interest earned, which you may earn annually. The cap limit is the highest you can earn for each term. Unlike other investment that you may not, you are a dime depending on the market performance but with equity index annuity, your annuity is guaranteed to earn an interest that will be credited to you each year regardless of market performance.