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Factors to Consider When Locating Suitable Variable Annuity

If you’re planning to retire in the near future, there’s the need to prepare well. You need in invest in various annuity options. Variable Annuity can also pay you well if you invest in it through proper guidance.  This kind of annuity gives you to room to invest in diverse opportunities.  You can invest in stocks, mutual funds and bonds.

In most cases, the insurance company you choose will require you to pay an initial purchase payment while you expect to receive income payments and gains from the same company at a later date agreed upon.  The contract details must be properly signed with terms and conditions that apply.

To get the most out of Variable Annuity, you need to take time to locate the most suitable type that can serve. Basically, there are two major types of variable annuity. They include deferred variable annuity and immediate variable annuity.  Deferred variable annuity gives you the room to defer your expected payment for a long period of time.  This pays you a lot since the money will keep accumulating. You may even pay a little amount initially for the investment and then watch it grow over time.  You’ll not pay any tax as well until you’re ready to make cash withdrawal at a future date.

On the other hand, the immediate variable annuity begins to pay you right from the very first month when you make the initial purchase payment. The income payment may not be much since your insurance company will pay you according to the performance of your investment. It’s always better to allow the investment to grow for a long time in order to enjoy the dividends.  You don’t need to worry about losing your investment in case of sudden death. There’s always the provision of   bequeathing the dividend to your beneficiary who may be your spouse or your child.

To get the most suitable Variable Annuity, you also need to consider other factors.  You need to consider the charges involved. There is a surrender charge required especially when you’ll be making withdrawals.  You need to also consider management fees and other charges that may apply.  Oftentimes, the charges are dependent on the insurance company you’re dealing with.  You need to know the company very well before you decide to invest in their offers.

You’ll also need to consider sub-account investment options, portfolio re-allocation limits, lifetime dispersal options and other features before you invest in the Variable Annuity. This protects you from various dangers associated with the investment plan.

There’s always the need to be well informed when looking for a suitable Variable Annuity. You can use the internet search engines to carry out a research on the best quotes from various companies. Today, several insurance companies in the US are offering all kinds of annuities for retirement purposes. You need to make proper inquiries before you take any step. There are insurance agents and financial advisers who can also help you out. You have to create some time to contact them.

Deferred Variable Annuity as A Retirement Plan

A variable annuity is usually classified into two different types depending on the when payments will be administered to the investor. The two types of variable annuity are deferred variable annuity which involves payments at a later date, or immediate variable annuity which involves payment soon after purchase, usually within a month or a year.

In a deferred variable annuity, the investor is not paid immediately as the investment is given time to amass earnings from the various investment options. Investment is placed into a sub-account and the value of this account increases and decreases in value depending on the performance of the investment assets in the market. The investor also has the option of adding different amounts of money in their account depending on their financial situation at a particular time and the account increases in value until the payout phase which is usually at retirement. The individual can ask for an early withdrawal though this is subject to a ‘surrender charge’ during the entire surrender period. But if they do not withdraw any amount of money until they retire, they are likely to get a good return on their investment.

Deferred variable annuity is exempt from task during the accumulation phase. This means that the individual can add funds into the account and its value can increase due to good performance of the investment. They can even transfer the funds from one investment option to another without paying any tax to the government. This feature of a deferred variable annuity separates it from other investment options and it gives the investor the opportunity to increase the value of their account without worrying about income taxes so that they can have financial security after they retire. The investor starts paying tax after they start withdrawing funds from the account, and most investors take advantage of this tax deferment to accrue as much income in their account as possible.

This type of investment is the best for a retirement plan when compared to alternatives such as a mutual fund. This is mostly because of the fact that tax is not charged on accumulating funds. It is best suited for investors who are yet to retire because of the risks involved. This is because in a deferred variable annuity, the investor risks getting full returns or losing a lot because return on investment is linked to the unpredictable market performance.

Individuals should always know what are the terms of their deferred variable annuity as well as the percentage rate of the ‘surrender charge’ of their account before they purchase a variable annuity. This is the only way they can be able to make a sound decision on whether this option is best for them.

After the investor has retired, he or she can choose to withdraw all the funds in one lump-sum amount or the amount can be calculated so that the individual receives payment for a certain period of time. There is also the option of converting the funds so that the investor is paid for as long as they live.

Death Benefit and other features of Variable Annuity

Variable Annuity comes with several unique features.  Death benefit is indeed one of the features that make the investment option worthwhile. It’s actually a very common feature you’ll always see in a variable annuity investment option.

The Death benefit in Variable Annuity secures your investment even after your departure from the earth.  It gives you the opportunity of adding a beneficiary to receive your investment income and gains when you die. The beneficiary can be your spouse or your child. If you die while still having your   investment in the variable annuity plan, your beneficiary will receive the greater part of all your investment.  All the money in your account will be paid to him or her.  He or she may also receive the guaranteed minimum which includes all the purchase payments minus your prior withdrawals.

Meanwhile some kinds of variable annuities may give you the room to choose a “stepped-up” death benefit option. This feature allows your guaranteed minimum death benefit to be based on a greater amount than the purchase payments minus the withdrawal. The stepped up death benefit is aimed at locking in your investment performance. It’s also aimed at preventing a future decline in the value of your account which may erode the amount you expect to leave to your beneficiary.  In most cases, this stepped-up death benefit attracts some charges as well.

Apart from the death benefit, most variable annuities also have other unique features that may attract extra charges.  For instance, there’s the guaranteed minimum income benefit. This guarantees a particular minimum level of annuity payments even when you don’t have enough money in your investment account. The loss of money may also be as a result of investment losses.

Variable Annuity may also have long-term care insurance feature. This pays for your home health care especially when you become seriously ill.

In any case, you’ll always benefit from the features discussed above when you deal with the right insurance company.  Before you decide to enter into any contract with an insurance company, you have to consider the company’s ability to fulfill the death benefits and other unique features of variable annuities. You may also consider the financial strength of the insurance company since this can affect the company’s ability to pay death benefits and other features.

Again, there may be some charges involved in death benefits and other features. Some insurance companies may deduct some charges from your account. You need to take your time to know more about the insurance company before signing any deal with them.  All over the US, there are many of such companies.  Not all of them can handle variable annuities perfectly. You need to make proper inquiries. You wouldn’t want to lose your hard-earned money just like that by making the wrong investment. You need to be properly guided both in picking an insurance company and also in choosing the best investments options.  You’ll always succeed if you engage a good financial adviser to help you out.

Considerations To Make Before Going For Variable Annuity

Variable Annuity is no doubt one of the viable ways to secure your future retirement through investing in several offers coming from insurance companies. You invest your money by making purchase payments in series of investment options while the insurance company pays you the returns at an agreed date.

ImmediateAnnuityToday, several insurance companies are offering all kinds of annuities meant for retirement purposes.  You don’t need to jump into them without making proper inquiries.  If for instance you want to go for Variable Annuity, there are several considerations you need to make.

In the first place, you have to consider whether the investment option will help you save for your retirement or not.  You may also consider using it for a similar long-term goal. You have to know the actual purpose you have in mind before thinking of going for the investment option.  This will help you to make the right decisions when the time comes.

You’ll also consider whether to invest in the Variable Annuity through an IRA or through a retirement plan.  This is going to affect how you’ll be taxed when the investment begins to yield.

There are some risks that are involved with Variable Annuity investment.  Prevailing economic conditions may force the investments to decrease in value. This also means a decrease in the amount you’ll earn. It also means a decrease in the initial purchase payment you made.  Ask yourself whether you’ll be willing to bear this when it happens or not. To guard against this, there’s the need to invest in several investment options when going for Variable Annuities. You can invest in the US stock,   international stocks, bonds and other mutual funds. There’s a possibility that some of the funds will always be on the increase while some may decrease. You’ll always recover the lost gain through other investments options that are increasing in value per time.

Another consideration to make when going for Variable Annuities is concerning the charges involved.  In most cases, there are surrender charges, handling fees, death benefit fees and other charges. There may even be other hidden and extra charges. You need to know more about them before you decide to   make your initial investment.

You’ll also decide whether to leave the Variable Annuity for a long time in order to avoid paying higher surrender charges when you withdraw.  You also need to decide when you want the payments made. Some people want it within few months of their initial investment while others want it later on.  You may even extend the payout session for life. This means that, you have to bequeath the payout to a beneficiary who may be your spouse or your child.

Indeed, there’s a lot you need to consider before deciding to go for Variable Annuity.  You even need to choose the best insurance company that can give you the best offers. You can make the entire process rosy by engaging the services of a financial adviser who will guide you through.

Basic Fees for Variable Annuity Investment

As a unique investment opportunity, Variable Annuity attracts some charges. You need to know more about them before you think of investing. Several insurance companies in the US have come into the business. There’s every need for you to be properly enlightened before you sign any kind of annuity contract with any of the insurance companies.

In most cases the charges reduce the value of your account in the Variable Annuity plan. They can also reduce the value of your investment returns. You need to know more about such charges.  Let’s examine   them now.

•             Surrender Charge

This is the fee you pay when you want to withdraw money from a Variable annuity within a certain period of time. In most cases, the charge comes after purchase payment has been made up to 6 to 10 years.  Your insurance company issues surrender charge as part of commission they require. It’s also known as sales charge. It’s normally used to pay a commission to your financial professional for selling the Variable annuity to you.

The Surrender Charge is simply a percentage of the amount you withdraw. It normally comes down as the years roll by. The declining period is usually known as “surrender period”.

•            Mortality And Expense Risk Charge

This is a kind of charge that amounts to a certain percentage of your account value. Your insurance company uses the charge to compensate itself for the insurance risks it passed through while the annuity lasts. The gain made from this charge is also used in paying your insurer’s cost of selling the annuity. This may include the commission paid to your financial professional for selling the annuity to you.

•             Administrative Fees

This can also be known as handling fees. Your insurer deducts the fees to cover the period of record-keeping while the Variable annuity lasts. The fees also cover any other expenses made   during the period of administration. In most cases, the charge may be a flat maintenance fee for your account.  It’s not much. It ranges as from $25 to $30 per annum.

The above charges are the basic fees you’ll always come in contact with when you go for a Variable annuity. However, there may be other underlying fund charges which may spring up. They are part of the charges that come with some mutual funds which you may be interested in. Such fees are usually deducted indirectly.

There are also other special charges that come with various features of Variable annuity.  Some of the charges may be attached to death benefits, guaranteed minimum benefit, and longer-term care insurance and so on. They are likely to attract some fees based on the prevailing condition that may apply.

In any case, there’s always the need to work with reliable insurance company when searching for variable annuities. Some of the insurance companies in the US that offer annuity packages do have hidden fees which you may never know at the initial states. You have to take your time to make proper inquiries before you agree to sign any contract deal. If you’re confused, always make sure you consult a reliable financial adviser.

Ways to Increase Retirement Income

The retirement period can be very enjoyable if you take time to plan it very well. It’s very possible to enjoy steady flow of income during retirement if you pay the price while you’re still in the active case. There are various ways you can use in increasing your retirement income without cracking your brain. Let’s take a look at some of them.

•             Annuities

You can invest in a profitable annuity for retirement in order to enjoy steady flow of income when you retire.  Annuities are usually sold by insurance companies to people who want to invest their money for their future retirement.  You can safeguard your retirement period with the annual income that flows from annuity.  However, this depends on the kind of annuity you go for.  Annuities are of various types. Among them include immediate annuities, deferred annuities, fixed annuities, variable annuities life annuities and so on. You can always enjoy the best of annuity for retirement when you locate a reliable insurance company that offers the profitable options.

•             Part Time Work

You can also increase your retirement income by engaging in a part time work. The fact that you’ve retired from active service doesn’t mean you’re tired of living. There are numerous part time jobs you can still engage in for the sake of raising extra income. Such part time works can also help you to maintain healthy living since you’ll be exercising your body in the process.

•             Real Estate

It’s very possible to increase your retirement income if you invest in real estate.  You can invest the money you earn from annuity for retirement into a profitable real estate opportunity. You can buy properties with the lump sum of cash you receive from annuity. In most cases, real estate investment allows your money to work for you while you rest. It’s indeed a sure fire way of enjoying steady flow of income during retirement.

•             Reverse Mortgage

You can tap into home equity through a profitable reverse mortgage.  In most case, the amount you’re permitted to borrow depends on several factors such as the interest rates, your life expectancy, and market value and so on.

•             Avoid Retirement Account Distributions

You can increase your retirement income by avoiding early retirement account distributions.  This usually comes with regular income tax and 10% tax penalty on the amount you withdraw.  On the other hand, you can be tapping into your IRA accounts without penalties when you reach the age of 59.

•             Invest in the Stock Market early

You can increase your retirement income by investing in the stock market early enough.  If you happen to purchase lots of stocks while you’re still in the active service, you’re sure to reap the harvest when you retire. It’s always very important for you to diversify your investments for better results.

Well, apart from other avenue discussed above, annuity for retirement remains one   sure fire way you can always explore if you really want to increase your retirement income. It’s always very necessary for you to be properly guided when choosing the options. Locate a good financial adviser to help you out.

The Normal Retirement Age To Start Receiving Social Security

Retirement age may vary though the most normal age to retire is between 65 years and 67 years of age. The exact retirement age depends on the year that you were actually born and to the Social Security regulations that covered your birth year. However, some can already receive their retirement benefit when they reach the age of 62.

Other factors where the Social Security benefits are based is on the exact amount of money that you have probably earned during your whole employment and the exact age which you wanted to receive your retirement benefits.

Accordingly, the social security administration has set a definite ruling on each retirement age for each year that you might have been born. If you were born in 1937 and earlier, the normal retirement age is sixty-five years old.  Moreover, if you were born in 1938, your retirement age should be probably sixty-five and two months.

Typically, two months are added to the retirement age for each birth year. If you were born in 1941, the right retiring age for you is 65 and 8 months and if you were born in 1942, the retiring age will be 65 years and 10 months. Meanwhile if you were born in 1960 and later, the right retiring age is 67 years of age.

One might wonder if how the age does affects the amount of retirement pay received. Are the benefits the same if you retire at your retirement age or will you receive lower? As mentioned earlier, you can resign at the age of 62 years old. However, if you retire early the amount will be reduced proportionately until you reach the normal retirement age for your birth year.

If you were born later than 1960s, the right retirement age for you is 67 but for some reason, you decide to retire early at age 62, the reduction is 30% and 25% if ever you decide to retire on the age of 63.

Likewise, the reduction will get lower when you are near to your retirement age. If ever you decide to retire at age 66, the reduction will only be between 6 to 7 percent. However, you will finally reach the full benefits when you reach your retiring age.

Retiring early or retiring late has both pros and cons. Early retirement will mean that your monthly benefits will be smaller and you will receive them on longer period. If you retire late, you will receive higher benefit but for shorter time. Depending on your needs and demands, both have the same pros and cons.

Keep in mind that it is important that aside from social security benefits, you still need to invest in other forms of retirement plans. The less risk and guarantees high yields are annuities. Annuity for retirement is an insurance product which is reinvested to bonds and securities. Money invested here is sure to have great value since it is tax deferred and principal protected. Your money is safe and secured with annuity.

With the right annuity, you will not be bothered whether you received less of your retirement benefit since annuities can offer the monthly paycheck that you need. Therefore, whether you received less or more, annuity may give you the right alternative for your financial needs and long-term care.

If you are looking for other retirement plans that will be the answer to your new life after retirement, you may start now by entering your ZIP at the top of this page and answer some basic questions to receive FREE & IMMEDIATE annuity quotes from our trusted partners.

Qualified Retirement Plan Eligibility Requirements

A qualified retirement plan should pass the Internal Revenue Code. If the provisions of your retirement plans or annuities do not meet the requirements of the Code, then, problems may arise.

It is the job of IRS to administer a determination letter program, which will allow plan sponsors to know beforehand the assurances that the retirement plan is stable and acceptable.

On the part of the employers, it is their role to make sure that they follow all the rules and processes that involves the retirement plans. It is the obligation of the employer to see to it that all participants and beneficiaries are all taken care of without facing problems.

Normally, problems arise due to some common reasons. Some common problems in retirement plans involve in change of staff, change in procedural requirements and change of existing service providers like attorneys and accountants.

On the part of the participants and beneficiaries, it is their obligation to see that the plans and documents that they are holding are up to date to avoid any possible conflicts. If there are any changes that you have observed, it is important that you let your insurance company know this. However, aside from retirement plans rules there are also some basic requirements that you need to memorize by heart.

For one, the Internal Revenue Code requires all participants to be at least twenty-one years of age. The day he or she had attain twenty-one years will be the date reflected on the contract or provided that the employee had completed at least one year of service to the company.

Next, your plan should describe well classification of your covered plan. In order to make it eligible, the plan should emphasis all the names of the people covered on the plan including you as the employee as well as your beneficiaries. Your rights from the contribution and all the benefits that is included in the plan.

If there are changes in some part of the plan, it is important that all participants adhere to the changes made to the plan to avoid dispute. Amendments or changes in the plan are not a reason to cut any monetary value to the plan. The value should stay the same regardless of any amendments or changes.

In addition, the limitations of the benefits and contributions that are provided in the Code section should also be implemented. For the year of 2011, the annual defined benefit plan is one hundred ninety-five thousand dollars while two hundred thousand dollars is needed for 2012. Meanwhile the limitation of annual contributions to around $49000 in 2011 and $50000 in 2012

After the accumulation period, it is now time for distribution. All the money that were invested in the plans is now ripe for pay out. Payout is given depending on your terms. If you preferred to receive it on monthly basis or semiannual basis, as an owner, that is your decision.  A plan must directly specify that the distribution process will start not later on the beginning date, or when the employee reaches the age of seventy years old or if it will be based on the calendar year in which the employee retires.

In the end, there are several qualified retirement plans that are available in the market. You may choose on which one will be best for you depending on your future goal. One of the popular retirement plans is annuity. Annuities are tax deferred and principal protected that offers security and stability for retirees.

There are several types of annuities that you may consider. In order to do that, simply enter your ZIP on the top of this page and answer some basic questions to know which type of annuity will be excellent for your future needs.

Fees To Be Paid For Variable Annuity Investment

A variable annuity has a lot of benefits and it usually has a significant rate of return depending on the performance of an individual’s preferred investment options. However, the amount of money left on your account can be determined by the various fees that the insurance company will charge you for various benefits. The most common charges that an insurance company deducts from an account for various services or benefits include:

FindAnnuities1.            Administration fees

The insurance company will charge the investor some fees for services such as the keeping of records or other expenses that have to do with managing and maintaining the account. These fees vary from one insurance company, and may be a flat rate or a percentage of the value of the account.

2.            Expense risk and mortality fees

This is usually a yearly fee and it is typically a certain percentage of the value of your account that is meant to reimburse the company for any risks that it takes up for your variable annuity. It sometimes compensates them for any costs incurred while dealing with your variable annuity. These charges also vary from one insurance company to another, and the individual investor must find out what the rate of their insurance company is.

3.            Fees charged on expenses imposed by underlying funds

The insurance company will indirectly impose the fees or any other expenses that are incurred by mutual funds in your variable annuity.

4.            Surrender charges

When entering into a contract with an insurance company to purchase a variable annuity, there is usually a set period of time in which you agree not to withdraw the funds in the account. However, if you are faced with a circumstance in which you have to take out some or all of the funds in the account before the said date, the insurance company will charge you for the withdrawal. The ‘surrender charge’ is a type of sales charge. The insurance agent is in essence selling you the variable annuity. It is usually in the form of a certain percentage of the total amount that you withdraw and it may decline as the surrender period goes by. Therefore, if you were supposed to withdraw the funds after eight years, and you start withdrawing after two years, you will be charged a declining surrender charge until after the eight years are up, and then this charge will not apply any more.

5.            Fees charged on benefits

Variable annuities has several benefits but it is important to note that there is usually a charge on each benefit, and the individual must read the terms carefully before choosing any particular benefit.

The charges imposed on a variable annuity will affect the value of your account and since the charges differ from one insurance company to another, it is important for the investor to carefully compare quotes before deciding which insurance company to purchase a variable annuity from. It is also important for the investor to carefully study the prospectus of an insurance company in order to know every single charge and to determine how these charges will affect the value of their variable annuity account.

How Variable Annuities Work In Its Accumulation Phase

A variable annuity is an investment tool in which the individual pays a certain amount to an insurance company, who can then invest that money in certain investment options, such as bonds or stock, and at the end of a particular period of time, pay the individual back their money periodically.

There are two phases in a variable annuity, and the first one is the accumulation phase of the variable annuity, while the second one is its payout phase.

The accumulation phase involves payments by the individual to the insurance company. In this phase, the individual makes either a lump-sum payment or a series of individual purchases to the insurance company, and then chooses where the money should be invested. For example, the individual can decide that about 20% of their money should go to the purchasing of stock; 20% of their money should go to the purchase of bonds, while the remaining 60% could go to the purchase of other money market instruments.

Since all these investment options change with time, your investment will also go up and down with time and this will be judged by the performance of the option you choose. You, however, do not have to invest all your money as you can choose to leave some of it in a fixed account and this amount will not change at all. This means that the money in the fixed account will always pay the individual a fixed interest though the rate may be changed by the insurance company from time to time.

The prospectus provided to you by the insurance company is your most vital information source as it will give you details about all the investment options as well as any fees charged by the insurance company and all the expenses that you will incur as well as all the risks involved.

While your money is in the first phase, the accumulation phase of the variable annuity, you can move your funds around the different investment options without any tax being charged on the investment income or on any of the interest you gain. However, different insurance companies may charge you a certain amount of money as transfer charges. Money should not be withdrawn during this phase as you are likely to be charged ‘surrender charges’ by the insurance company. Most companies charge ‘surrender charges’ for withdrawal before 6 years, though some require as long as ten years before any money is withdrawn from your account. Money should also not be withdrawn before the individual reaches the age of 59 and a half as the federal government will charge a tax penalty of 10% for this withdrawal.

There are other types of variable annuities which do not have an accumulation period as they are immediate variable annuities. This means that the individual starts getting payment immediately after the purchase.

It is important for the investor to understand all the terms of the accumulation phase of the variable annuity, as well as any risks and the potential benefits of each investment option so that they can be able to make the best investment choice.