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Pros And Cons Of Immediate Annuity Payouts

Most of you looking for a source of income during retirement are likely to be tempted by the attractive nature of annuity payouts. This should not be the case at all. Take enough time for soul searching to avoid any later regrets and misery. You cannot afford to fall into such a trap when actually you can keep off from the occurrence of the same. The truth however stands out that immediate annuities come along with great benefits that are very attractive indeed. Nonetheless, this should not be bait that will; lure you into making the biggest financial blunder in your lifetime.

Pros of Immediate Annuity payouts

The two main pros of immediate annuity payouts are a high payout and security of your investment.

High payout: There is a high likelihood of receiving a huge payout when you apply for an immediate payout. This will be determined by your current situation and the choices you make as an individual. For instance, 100,000 dollars worth of investment might earn you 700 dollars every month as payments in return. This figure is way beyond a return at 8 percent. Given the situation of the current market, it is just too good to be true; very appealing and attractive. Give this a second thought then finally say Yes or No.

Security: Although your income is not fully insured, the insurance company from which you purchased the annuity will provide the necessary backing. A sharp contrast exists if the current scenario is compared to what it used to be previously. However little it may seem, it is better than nothing. More so, the incoming payment is guaranteed irrespective of the unfavorable fluctuations in the stock market. You need not to worry because your income will still flow in unaffected. Your insurance company takes all risks and covers arising costs and expenses.

Cons of Immediate Annuity Payouts.

Having seen the benefits of immediate annuity payouts, you cannot downplay the flip side of this coin.

No access to capital: when you eventually make a choice to buy an immediate annuity, you have actually parted with your capital for good. Make no mistake of believing that the funds are at your disposal in case of an emergency. The contract cannot be reversed and so no cashing in is ever possible. Your income will flow in if the company continues operating .any attempts to alter the monthly payment or get more returns in case of an emergency will bear no fruit however much you try. You will be forced to resort to other sources to handle the emergency.

Your payout isn’t the return your money earns: whatever you get back in form of income is the sum of principal and interest. Though it might pass unnoticed, a large percentage of what you receive yearly actually comes from your investment and not the returns. Given a close look, it is clear that the returns are a paltry 3.2 per cent this is not worth taking the risk since the market might experience a drastic rise in interest rates even before your annuity matures.

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Conditions of Having Deferred Annuity

Deferred annuity is a retirement policy where the depositor or the owner delays or defers   payments after investing and starts getting allowances in the future dates. In this case, the annuity gets interest for several years. For an investor who does not want to get income and wishes to delay payments to avoid being taxed on funds, they do not require immediate annuity after their retirement.

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Profitable deferred annuities are offered by insurance firms through insurance agents, stock brokers and banks. The investor gives the insurance group either one big premium or if allowed, he or she can make additional premiums.

A deferred annuity starts to make payments at the end of agreed Accumulation Period after retirement, this continues for as long as the beneficiary lives. It protects the policy holders from draining their funds before death, in case they just decided to keep their lump sum money in their bank account. But for those who takes up the policy, even when all of their funds in the agreement exhausted, the insurance firm will still give monthly allowances while as the beneficially is still living.

The time when the owner starts getting funds from the insurance firm is called Payout Period. The investor will be presented with multiple options, for their payout. One may opt for a monthly income as long as he or she lives or a onetime payment like 20 years or 25 years after the retirement, depending on his life expectancy.

Unlike with the case of immediate annuity, where one starts getting monthly earning right away or after one year after making a one lump sum purchase. Deferred annuities policy are not necessarily bought with a lump sum premiums, but can be done monthly, quarterly, or yearly with prior agreement with the insurance company. The investor too can get periodic earnings for life in different patterns, like 10, 15 or 20 years in his or her life.

One is free to withdraw the savings from the deferred annuity before the end of the accumulation period at any time, but comes with some charges. You can also choose to opt out of the plan and close down the account, but this attracts some costs based on the conditions tabulated below.

•             If you opt for the plan within the initial years of opening it, you will be will charged surrender cost by the insurance firm.

•             You will also be taxed on any interest earned for the period the account was in operation.

•             You will also pay 10% additional tax on your savings interest if you take a lump sum payment before attaining the 59.5 years of age.

Deferred annuity is best suited for people:

•             Whose currently tax rate is high, but they are expecting it will go down the future. They can avoid paying some tax by saving their many in a deferred annuity, and then withdraw the funds in installments when tax rate is lesser.

•             Those that have idle lump sum cash and planning to use it right away and want to accumulate more for departure time.

•             Whose income keeps on fluctuating, some years is higher and lower in other years, to avoid future uncertainty.

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Indexed Annuity vs Immediate Annuity – Weigh the Differences

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

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

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

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

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

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

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

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

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

The Basic Facts on Immediate Variable Annuity

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

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

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

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

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

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

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

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

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

Immediate Fixed Annuity – The Basics

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

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

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

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

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

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

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

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

3. It provides you with a definite regular income.

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

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

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

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

Immediate Annuity Taxation – It’s All About Tax

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

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

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

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

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

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

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

Immediate Annuity Solution to Long Term Care

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

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

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

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

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

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

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

Immediate Annuity Rates – The Highs and the Lows

An annuity rate is one of the factors that should be considered before buying an annuity contract. Immediate annuity quotes do not stick to one figure of rates. They go high and they go low.

Advertising annuity products always include the rates of their annuities. You might be tired of seeing and hearing advertisements that say they got the highest annuity rates in the market. Well, that is how it really is. It works that way. The higher the rates of annuities a company offer, the more probabilities of a great number of buyers to come.

Annuity calculators are very useful in calculating the rates of your annuity. This is very convenient when you are comparing annuity rates because you can have a better outlook on the better investment options. There are particulars that you can use when calculating the rate of immediate annuity quotes. You have to look at the investment amount and the guaranteed income you will be receiving.

Still, the high rates are not that significant if you end up buying an annuity that is not really for you. To enjoy the high rates privileges, you must also keep in mind to pick what is the best annuity for your life. An 8% rate is very enticing. It really sounds great. However, if it is a rate offered by a single life annuity and you are not single at all or have beneficiaries, it will eventually stop the moment you pass away.

Let me give you a picture on how it will work. Let us say that you bought an immediate annuity, specifically a life annuity. If you have a long life expectancy and you have purchased an immediate annuity, a 5% rate of return is not bad at all. Really, it isn’t. If it is more than that, let us say it reach over 6% or 7%, then you are one lucky annuitant. However, the rate of return for an annuitant that has a short life expectancy could not be so great at all. If you die after 5 or 6 years after your annuity purchase, you will have a negative rate of return. That is really tragic isn’t it? You do not want this to happen to you. That is why you have to choose very prudently what annuity to buy. Consider every possibility and think more openly before you leap into action.

Now, finding an insurance company that gives an annuity quote with a high rate of return is not that difficult. They advertise it themselves. When is the best time to buy an annuity? Well, the answer is obvious. It is best to buy an annuity when it offers a high rate. Rates may go high and low over time depending on many factors. You can also be deceived by the number of rates presented to you if you do not have at least a small knowledge on how it works.

You must at least know that there are different types of rate annuity companies present. There is the current rate, the initial rate, and the renewal rate. The current rate, as the name implies, is the rate that is currently available at that moment for you. The company will decide how long this rate will last. The initial rate is the rate, sometimes referred to as bonus rate, is the rate first allotted to your annuity contract for the first few years. This rate is generally higher that the rates to follow. Lastly, the renewal rate is the rate offered by the company when the rate coverage of the contract ends. The annuitant could choose another rate which the company will provide. These rates are not applicable in every single immediate annuity though. It is still up to you if you will choose to be on fixed annuity or variable annuity.

Immediate Annuity Quotes – An Insider’s Scoop

Annuities are versatile. There are many kinds of annuities available for everyone – immediate annuities, deferred annuities, fixed and variable.  With these many options of annuities, there are even more annuity quotes to choose from.

AnnuityRatesFirst, what is an annuity quote? An annuity quote is where the insurance company gives you a picture of what you will be giving and receiving in a certain annuity type. This may include the benefits, the range of rates expected, the principal amount, the deductible amount, and so on. This is also where the policy limitations are stated.

Immediate annuity quotes slightly vary depending on what type of annuity is going to be purchased. Immediate fixed annuity quotes indicate the interest rate of the payments. The immediate variable annuity quotes, on the other hand, it cannot do so because of the fluctuations that will be going on for the whole duration of the annuity contract.

Some annuity quotes offer higher rates than most of the annuity quotes. Some even have higher benefits than the others. However, do not be very enticed by the high rates and benefits alone although they are one of the factors to consider on choosing an annuity quote. Focus on what you really need. An annuity quote is just right for you for sure. Let us say that you are married and have kids that would go to college soon. You are retiring in just a matter of time so you have decided to buy an annuity. One annuity quote offers a high interest rate. However, no matter how high the rate is, it may not be the best option for you because the stream of payment will terminate on the day your life ends. What you need to look for is an annuity quote that includes a continuous payment that will be passed on your beneficiaries in case if you die unexpectedly and the annuity is not yet finished.

Choosing the best annuity quote is a very subjective matter. What is best for you might not be the best for others. The best annuity quote for a person is an annuity quote that will be more beneficial and advantageous on his or her part. Annuitants greatly differ in their needs and situations. That is why don’t let other people dictate what the best annuity quote is for you. You know what you need better than others think they do. Their service could be of great assistance but the final decision is in your hand.

There are many ways to get an annuity quote. You can get one yourself or someone might get one for you. There are many available annuity quotes online. You just have to log on or click on something and you will have it immediately, faster than you imagined. You could also get an annuity quote from an agent or a broker who happens to be endorsing their products in your home or office. You can also go to insurance companies yourself to look and avail one. Whichever way you choose, always remember to broaden your option. Do not stick to only one. Try to look at different references in order for you to compare each and everything. Trust your instinct and judgment. You know what annuity quote meets your needs and wants.

Immediate Annuity Quotes – Why Making Comparisons Is Necessary

The immediate annuity is a form of investment that can guarantee that the huge amount of money you have today will not suddenly slip off your hands because of impulsive, unstoppable, and wasteful spending. It allows you to stretch your money for many years. In fact, you can stretch it for as long as you live if you want to.

Annuity quotes allow you to find out the estimated amount of income you could get using your savings. Are your savings enough for you to purchase an annuity than can provide you with a regular income for as long as you live? If not, how much more do you need?

To help you decide whether to invest in an immediate annuity or not and, if you have eventually chosen to purchase this type of annuity, decide how much money you are willing to invest, it is important to compare annuity quotes from different sources and different companies.

Annuity quotes are available from different sources online. What is great about online sources is that they provide you an easy and immediate access to annuity quotes for free. Reports on annuity quotes are especially made for each individual interested in purchasing an annuity. Annuity quotes are based on the interested investor’s ZIP Code, the amount of money he/she is planning to invest, his/her objective in purchasing an annuity, and his/her date of birth.

Annuity quotes will provide you with adequate answers for all the questions you have regarding the different types of annuities, the disadvantages and the advantages of each type, and how they work in keeping your investment safe. You will learn what type of annuity is best recommended for people who are in the same situation as you are. Different goals, different priorities, and different financial horizons are also taken into consideration in annuity quotes reports.

Annuity quotes will give you possible answers about how secured an annuity is, how you might pay the premium on your annuity, and how you might withdraw annuity income. Moreover, because you might be purchasing an annuity not just for yourself but also for the people you hold close to your heart, annuity quotes will also let you know about how you can be guaranteed that they receive benefits from your annuity in case you suddenly pass away.

Annuity quotes vary from insurance company to insurance company. This means that some insurance companies might be offering annuity contracts that are more favorable to you than other insurance companies. Annuity quotes inform you about all the things you need to know to become an informed investor. Quotes make sure that when you do purchase a particular annuity contract, you know what you are doing, and that, most probably, you will get what you expect from your purchase.

Usually, an interested investor gets an annuity quote from an insurance agent. The downside of this transaction, however, is that the insurance agent will only give you the annuity quotes of his/her employer company. For the employer company, this is good because their agent is loyal to them. However, for you, the interested annuity investor, this is a disadvantage. Why? Because you will only know about the annuity quotes from a single company when, in fact, there are a lot of other companies out there that offer annuities to the public.

On the other hand, sources and agents online provide you with annuity quotes from different insurance companies. This allows you to compare quotes and to discern which company offers the options you are looking for in an annuity contract. It lets you look for the company that extends the best offerings for you.