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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.

Variable annuity As An Investment Option

Financial security, especially in the years after retirement, is one of the things that most individuals crave for and a variable annuity is one of the ways to achieve this. This is a type of contract in which the individual and the insurance company come to an agreement in which intermittent payments are made to the individual by the insurer. The purchase is made either by purchasing a lump-sum payment or smaller individual payments.

There are various investment choices at the disposal of the individual and the performance of these investments is what will determine the value of their variable annuity.

A variable annuity is different from other investment options. With it, the purchaser is able to receive payments periodically for the days that they have left off for their beneficiaries’ remaining days. There is therefore security as the purchaser will never outlive their assets.

There is also a death benefit in that if you do pass away before you receive any payments from your variable annuity, the designated beneficiary will get a certain amount that should be equal to the amount you paid when you bought the variable annuity.

Tax on a variable annuity is postponed. This means that no taxes are charged on any income accrued by the investment before you withdraw the money. Money may be moved between different payment options without a single cent being charged for the transfer. However, when you start withdrawing cash from the variable annuity, regular income tax on your earnings will be charged on the payment instead of the capital gains rate which is actually lower. Therefore, if your variable annuity exists in the long term and is supposed to serve you after you have retired or to help deal with other goals in the long term, the variable annuity will serve you better. If this is not the case, you might end up losing in the long term due to the tax charged when you start withdrawing.

There is a lot of risk involved when purchasing a variable annuity and it is not advisable to settle on this type of investment unless you intend to use it to achieve long term objectives such as ensuring that you have a steady income after retirement.

All the details about a variable annuity are usually contained in a prospectus which is provided to the potential buyer by the insurance company. It is advisable for the individual to read carefully through the terms and conditions in the prospectus as well as any payments that are to be made and all the options available for the purchaser to invest in. The terms of the death benefit should also be considered, as well as all the options of how you as the individual will be able to receive the payments and any interest earned.

A variable annuity is a very good investment vehicle especially for someone who would like to receive money for a long time, that is, until they pass away. It does carry some risks, but that is usually the case with any type of investment.

Testimonials about the Immediate Annuity – What People Are Saying

We have heard enough from insurance agents! Now, it is time to hear what the people – the annuity owners and other investors – are saying.

Several firms specializing on financial planning report that there is a long list of people who had profited from purchasing different types of immediate annuities. It has been reported that for the last ten years, immediate annuities, especially the immediate fixed annuity, have become popular with a lot of investors because of it’s secure, feasible, and reliable investments.

Investors react to immediate annuities differently. Some of them agree that it can be a secure, reliable, and feasible investment. On the other hand, some people argue that it is not a profitable investment tool. These differences in opinion are, of course, a result of their different experiences with the annuity. Let me give you a brief summary of the discussions, testimonials, reviews, and comments about immediate annuities that I came across on the most powerful technological invention on communication – the internet or the World Wide Web.

Those who consider the immediate annuity as a secure, feasible, and reliable investment tool say that:

1. An immediate fixed annuity is a good investment choice if you want your income to last a lifetime. It guarantees that you will not live longer than your money. As a result, you can just sit back and relax. You do not have to worry about unmindful and careless spending that will make all your money slip off your hands. With this annuity, you are given the power to budget your money on a monthly basis.

2.  It is appropriate for people who have saved but, unfortunately, failed to save enough for their retirement. The money you invested in an immediate annuity grows through the interest rate specified in your annuity contract. Moreover, if it is a fixed annuity, it is tax deferred. This means that your money will grow faster.

3. It allows investors to save a huge amount of money from taxation

4. It is recommended for an old investor who does not need to gain access to his capital before the contract’s maturity date.

5. Your money is guaranteed by the issuing insurance company.

6. Your investment is not going to be affected by market downturns, recessions, or economic depression.

Those who think that the immediate annuity is not a profitable investment say that:

1. Most annuity owners sell their annuities because they do not gain anything from it. That is why the number of articles online about how to sell your annuity is increasing.

2. Annuities in general are only offered by insurance companies because these guarantee them a huge profit margin.

3. It is only useful for sales agents who receive a commission for every annuity contract they have sold. Some people think that sales agents do not really care for the welfare of their clients; they only care for the money they could get when they succeed in convincing clients to buy annuities.

4. It does not allow annuity owners to have access to their own capital.

5. It does not allow you to profit from a rise in the stock market.

These are people’s basic arguments about the immediate annuities. Although these are important for your own assessment, you should not solely rely on these testimonials.  Talk to financial experts you trust. Compare annuity quotes and rates from different sources. There might come a time when you no longer have to rely on other people’s opinions because you already have a first-hand experience with this kind of annuity.

Answering these questions is important because each of our partners will provide you different rates depending on your individual circumstances and situation.

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

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How the Fixed Annuity is Taxed: Don’t be Lured by Tax-Deferrals

In the fixed annuity, the client’s investment is exempted of any tax while it is still accumulating. However, this does not mean that this annuity is tax-free.

Tax deferral is one of the chief advantages of the fixed annuity. Taxes are charged only upon the distribution of corresponding annuity income to the company’s clients and only when annuity owners withdraw an amount from the account. This may give the annuity owners a higher degree of tax control. Moreover, it gives the annuity account a greater potential for growth. It also allows earnings to compound without income taxation throughout the accumulation phase. However, tax deferral can be a disadvantage or an advantage, depending on how you play the game.

The annuity owner’s investment will grow free of tax while the annuity is still active. However, when the owner or the beneficiaries withdraw income, the income will be charged with the usual tax rate of the person who made the withdrawal.

FindAnnuitiesThis feature can be negative when the person who made the withdrawal has a high tax rate. If the person is in the highest tax bracket, he/she can be charged with as high as 33% of the annuity income that is withdrawn from the account. This 33%, the summation of the State and the Federal tax rate for the highest tax bracket, is more than double of the 15% capital gains rate. The capital gains rate is the tax structure applied on other investment options like mutual funds. On the other hand, tax deferral can be a positive feature when the person who made the withdrawal has a low tax rate. Because in fixed annuities, the owner decides when to withdraw income from his/her account, wise investors make large income withdraws when they are already in a lower tax bracket. In this way, the tax charged to their income is not high. Moreover, most annuity owners are in a lower tax bracket during their retirement than during their pre-retirement. When they withdraw income from their annuity during their retirement, they save up to 15% on tax. Because you are only charged with tax every time you withdraw from your annuity account, you are in control of when to pay your taxes.

Moreover, taxes can be postponed. This happens when the owner of the annuity dies and he/she named his/her spouse as the beneficiary of the annuity account. The turning over of the account is carried out without taxation. Moreover, the spouse (the beneficiary of the original owner of the annuity), can also transfer the annuity to an heir who can have as long as five years of additional tax deferral.

In order to bring the tax-related features of fixed annuity to your side and give you the best outcome from your investment, you have to always keep in mind that fixed annuities are not considered as a taxable income. Doing so can help you save tax from your Social Security benefits. By putting your taxable income into your fixed annuity, you are making it non-taxable. If you keep your taxable income under the threshold that triggers taxation of your Social Security benefits, you do not have to pay any tax at all.

In conclusion, if you are a wise investor and a good player in the annuity game, the fixed annuity might work for you in relation to investment features that are concerned with the payment of tax. This annuity allows you to minimize your tax expenditure by letting you choose when and how often you want to pay your taxes. When you withdraw from you annuity account, however, you will be charged with the regular tax rate.

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The Inside Scoop on How Fixed Annuity Works

Annuities in general have the characteristics of an insurance, which is usually known as the Guaranteed Minimum Death Benefit or In short “The death benefit.” In the event of death of the purchaser of the annuity before the redemption or payments starts the designated beneficiary will get the amount invested minus any withdrawals. Before the withdrawals are done the return to an annuity is not taxed which is a benefit that draws people to invest in annuities. In the case of a withdrawal the returns is taxed as a current income and not like the capital gains tax rate. Fixed annuity allows individuals receive a life income, to defer payment on their retirement benefit and they guarantee them a rate of return.

A fixed annuity is a type of savings that has a low risk and they assure one of a positive rate of return. It allows people who invest in them to have a peace of mind. They are usually guaranteed by the company that is issuing them both the earnings and the principal. If you are planning to purchase them, it is advisable to ask a financial expert the insurance ratings of a company and their financial strength. An annuity is described as a contract between the purchaser of the annuity and the insurance company in which the purchaser makes a series of payments in return for a periodic of payments at some future date or immediately after the payment. In the case of fixed annuity, the insurance company pays a specific rate of interest as your account keeps growing.

There is a tax penalty where you withdraw your money at the early stages of an annuity and you will be forced to pay surrender charges to the company. You will have to agree with the insurance company on the amount per dollar that will be the periodic payments.

Fixed annuity stabilizes investment income and people who are about to retire usually go for them. It will enable you to earn a fixed income and your principal amount does not change during the term of your plan as interest is accumulated over a period. Even where the interest rate in the market falls you will still receive the same fixed rate but the opposite is also true. You will not benefit if the interest rates in the market goes up. It has a zero risk factor that is why fixed annuity is the most acceptable.

The interest rate offered by this annuity is competitive and they are better than that of Certificate of Deposits. You will get a higher yield when you decide to withdraw if you wait for a longer period. There are insurance companies that offer bonus rates to those who invest when the period of their investment ends. On top of your contractual interest you will get to enjoy extra interest therefore, you will have a boost on your principal amount. A number of places where you will find fixed annuities. You will find them in Brokerage firms, insurance companies, banks etc.

Fixed Rate Annuity: Be Properly Guided Before You Buy

It has been said that fixed rate annuities are perhaps one of the safest annuity product out there in the market. As its name implies, this kind of annuity offers its annuitant a fixed interest rate as included in their contract.

Some annuitants prefer to have stable and sure rates for their annuities. Some annuities, variable annuities in particular, have rates fluctuating from time to time depending on the performance of the investment or the investment company. Well, there is a solution for this now. If you really want to assure that the interest rate will be fixed in a span of time of your annuity contract, then fixed rate annuity may be the right type for you.

First thing first, one should know the different rates insurance companies offer to annuitants. Current rates refer to rate the company decides to credit for a period. The company might assure the annuitant that a rate of 6% will not change for let’ say, 5 years of the contract.

The initial rate at some annuity contracts might be higher than the other rates to follow. This kind of rate is what we call bonus rate. Clearly, its main aim is to give bonus at the starting years of the annuity. It is rather attractive to some prospective annuitants actually. A good example of this is when a contract indicates that at the first three years of investment, the rate is 7% while 5% rate only in the next years. Without explaining this kind of rate to prospective annuitants, especially to those who are not knowledgeable enough about annuity rates might cause misunderstanding and disappointment on their part.

Lastly, renewal rate refers to the rate credited by the insurance company by the end of the period specified in the annuity contract. The company will set the new rate to the annuity, which they may tie with external references or index. All of these should be included in the contract.

The term “fixed” in the fixed annuity is a bit ambiguous and misleading. By being fixed, it means to provide assurance that despite of the fluctuations the investment, the market, or the company encounter, the annuity will not be affected. The amount of money that would be agreed upon will still be the same amount of payment until the end of the term or a period. The rates mentioned above could also be present in the contract depending on the company selling the annuity.

The annuities under deferred fixed annuity and immediate fixed annuity fall in this category. Deferred fixed annuity may guarantee fixed interest rate for a specific period and immediate fixed annuity provides a stream of income that will not change during the payment period. These two types of fixed annuity may be the right choice for someone who wants to assure the stability of rates in his or her annuity.

Insurance companies diverge in so many ways in presenting annuity quotes to prospective clients. Every potential candidate for annuity aims to get hold to the most valuable and best annuity quote. To find a good one, it is important to broaden one’s option. You must look to a couple of different sources. Each insurance company bid for different products and different rates. Thus, it is crucial to take time in choosing one. Two things must always be kept in mind in searching for a good fixed annuity, its features and its rates. These two should always have a balanced combination. Consider the features you might benefit from and carefully examine the rates that would fit your needs and budget.

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How to Explain the Fixed Income Annuity

What is annuity is a question that is not new to most insurance company, and many agents are faced with the task of explaining this type of investment to potential clients. The simple answer is that it is a type of investment in which the investor enters into a contract with the insurance company after paying a certain amount of money, either at once or in premiums, and receiving returns either immediately or after a guaranteed amount of time.

This definition is quite general, and the investor who inquired what is annuity may want you as the insurance agent to narrow down your definition to a particular type of annuity. One of the more common types of annuities is a fixed income annuity, and the individual who wanted a definition to what is annuity may be advised that a fixed income annuity is one in which an individual invests money, and is paid a fixed return every month after a certain amount of time as agreed in the contract.

The main purpose of a fixed income annuity is to preserve the capital of the investor, so that they will receive a fixed amount after every month for a certain period. It is advantageous in that, like all types of annuities, tax is not charged until the investor begins to withdraw money, after which income tax is applied.

The individual who inquired what is annuity should be advised that they are not allowed to withdraw any funds from this type of annuity until they attain the ripe age of fifty nine and a half, before which their withdrawal will be charged a ten per cent withdrawal penalty by the federal government.

The individual who wants to invest in a fixed income annuity should not do so before carefully reading the terms and conditions of the particular company. They should seek help from a professional, if need be, before they sign the contract so that they can familiarize themselves with all the fees involved as well as any bonus or rates involved.

Most fixed income annuities are not immediate, and the individual may have to wait a certain amount of time before withdrawing in one. If they choose this option, they will be charged surrender fees in case they end up withdrawing earlier, even if it is due to an emergency, therefore, they should consider this before they sign the contract.

The best contract in a fixed income annuity is one in which the insurance company does not charge a lot of fees, therefore, all your investment does not go towards paying the insurance company. All these details are usually included in the documents given to the individual before the contract is signed, and they should make sure that they study them all.

A fixed income annuity is best suited for individuals who are not risk takers, and who do not need to get rich quickly by risking their money on investment subaccounts. The payments are guaranteed, but in case investment options such as stocks and bonds are doing well, the investor will lose out.

Understanding Fixed Equity Indexed Annuity for Beginners

An investor looking for a place to put his money with the hope of getting returns would ask, what is annuity? This is a valid question, and the answer is – it is an investment tool in which an individual could sign a contract with an insurance company in which they will pay an amount with the hope of returns starting immediately or in some time in the future.

There are various types of annuities, and an investor who inquires what is annuity may want to familiarize themselves with these as well. One of the major types of annuity is known as a fixed equity index annuity, and many retirees are opting for this.

An indexed annuity is usually linked to the rate of a particular index, and the payments in such an annuity usually depend on the performance of this index. The investor who inquired what is annuity may want to know how a fixed equity indexed annuity works, and the explanation for this is that when the index’s value rises, the investor will get a higher pay, but there is a guaranteed minimum that the investor will always get, even if the index falls.

An insurance company will purchase stocks in a company in a specific index which will be tracked for a year. At the end, in case the index has risen from where it was at the time of purchase, the investment is cashed and the returns will increase the value of indexed annuity. At this point, the investor will purchase stock again in preparation for another year. If this is not the case, then the investment is not cashed out and no interest is accumulated for that particular year.

An individual inquiring what is annuity may also want to be advised that like all other types of annuity, a fixed indexed annuity does not accumulate any task before withdrawal. This is good news for the investor, as they will not pay the federal government taxes on this investment until they start withdrawing, after which they will pay an income tax.

This option is quite advantageous in that there is the possibility of profit, but no possibility of losses as there is a guaranteed minimum that the individual is paid. When entering into the agreement with the insurance company, the investor will have to state the total amount of time in which their money will be invested, and the total amount of time in years that they expect to receive their payout.

The investor will choose to either withdraw all their money at once during the payout phase, or choose to get monthly payments for the agreed amount of time. This type of annuity is best for people who do not want to be paid immediately, and who have some time before they retire as the money needs time to grow. It is a good planning tool for individuals who would like to have a secure retirement period without necessarily worrying about where funds will come from, and the individual who also has a long-term goal and will therefore require the money in a certain number of years.

Understanding the Imposed and Not Imposed Taxes on Fixed Annuity Investment

It is very important to know what taxes you are supposed to pay from your annuity scheme. Otherwise, you might be labeled as one of the people who evade their tax obligations. Consequently, that can have bad results on your image or even some legal consequences. Therefore, at what point will you have to pay taxes within a fixed type of annuity?

To begin with, there is the need to understand that this type of annuities has two phases, which have different tax rules. The first phase is called the accumulation period. In this time, you are not supposed to withdraw large parts of your principal. It is supposed to grow for your later use. However, investors are allowed to withdraw up to 10% of their invested money every year. Therefore, when someone withdraws more than this amount, there is always a tax penalty of 10%. Other than that amount, you are not supposed to pay any other tax on either the principal or the earned interest.

RetirementInvestmentThe second phase of a fixed annuity is the distribution phase. During this time, you will decide how you will receive your payments from the insuring firm. This could be done periodically or as a lump sum. Irrespective of the method that you choose to receive your payments, you will be required to pay taxes on the interest amounts. This happens in different ways. One, when you receive a lump sum payment from your annuity, your principal will not be taxed but the interest earned will be subjected to the regular income tax rate. Two, for periodic payments, you could pay taxes on every payment that you receive or after receiving the entire principal.

With the first option, the insurer calculates the distribution amount of your invested money. You are not taxed on this payment. However, anything above that requires that you pay a tax at the rate of regular income. The second option means that you may not pay any tax for the payments received until they total to your principal. After that, you then start paying fixed annuity taxes.

Apart from these taxes imposed on the annuitant, most people would love to know if beneficiaries of a fixed annuity pay any taxes. Firstly, let us understand who a beneficiary is. A beneficiary is the person whom an annuitant names to receive payments on his (annuitant’s) behalf in the event of death before receiving all the payments. Depending on the agreement in the contract, the beneficiary can receive only the balance for the invested money or he could receive even the accumulated interests. Moreover, he usually has the choice of receiving the money either as a lump sum or as periodic payments.

For the beneficiary who receives only the principal amount of the deceased annuitant, he does not pay any taxes for fixed annuity. However, for the one who receives both the principal money and the earned interest, he has to pay some taxes. This is irrespective of whether he receives the payments as a lump sum or as regular payments; he has to pay taxes on the interest amounts just as he would on any other ordinary income tax. In other taxes, beneficiaries who have high incomes could be subjected to higher tax rates. In such cases, it is advisable not to annuitize but rather transfer the funds to another contract, which you will own.

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