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1035 Exchange: Tax-Free Transaction for Your Fixed Annuity

A 1035 Exchange is a process of replacing an insurance-related asset with another. The term was derived from Section 1035(a) – (d) of the IRS code, which sets the ground rules for the 1035 Exchange.

Section 1035 of the IRS Code

When applied to fixed annuity, 1035 Exchange refers to the tax-free transfer of an annuity contract from an insurance company to another insurance company.  Under the Internal Revenue Service Code (IRS), individuals are allowed to make a tax-free transaction in which they exchange insurance-related assets that are of “like and amount” for each other.

Thus, if one already has a fixed annuity contract but he/she wants to make a new fixed annuity contract with another insurance company, he/she should apply for a 1035 Exchange. The value of his/her old annuity account will be transferred over to his/her new annuity contract.

The 1035 Exchange Process

FindAnnuitiesAlthough participants in a 1035 Exchange do not have to worry about paying tax, they have to go through a lengthy process.

1.  The consumer must apply for a new annuity plan. In the application, the consumer indicates a new company as the trustee of his/her annuity funds.

2. The new insurance company sends the 1035 Exchange application to the consumer’s previous annuity company. The company also attaches a letter requesting for the transfer of the consumer’s funds.

3. In the next step, which is termed as a period of conservancy, the previous company attempts to win back the patronage of the customer.

4. When these attempts are proved to be in vain, the old company directly transfers the consumer’s funds to the new company. The old company also provides information about the consumer’s previous annuity contract. This information will be used to compute taxes when the consumer withdraws income from the new annuity.

5. In the compliance stage, the new company confirms that

the owner and the beneficiaries of the previous annuity and the applicant of the new annuity are the same individuals.

6. The new annuity contract can be issued once compliance has been confirmed.

The 1035 Exchange as a Benefit

The 1035 Exchange gives consumers more power over their right to a high quality and profitable annuity. It makes them more powerful against insurance companies that take advantage of consumers and that do not give them the proper annuity rate and income. Because the provision enables consumers to transfer over their accrued annuity value to their new annuity contract without being subjected to taxation, it drives insurance companies to generate annuity proposals that offer the best annuity features for consumers.

Applying for a new insurance plan is also of extreme importance, especially in regard with financial concerns. This is especially true when the consumer’s health status and lifestyle have changed since the acquirement of his/her old insurance asset. To elaborate on this, let us use an example. Let us say that the consumer has a whole-life insurance policy. At the time of his/her acquirement of this policy, he was a smoker. Because he was a smoker, he had to pay a high premium. Today, however, he/she does not smoke anymore. Because he/she is already a non-smoker, he/she should pay a premium that is lower than the premium stated in the insurance contract. However, the premium stated in the contract is not subject to a change in the consumer’s lifestyle. In order to save on his/her insurance premium, he/she should apply for a new policy. By employing the 1035 Exchange provision, the consumer might not even have to pay a single penny for the transaction. His/her old insurance policy will simply be cancelled and its accrued value will be turned over to the new policy.

The 1035 Exchange and the Economy

The 1035 Exchange provision promotes economic competence. First, it pushes for a high quality insurance asset, like an annuity. Because consumers can exchange an unprofitable asset for an asset that is deemed more profitable, the 1035 Exchange heightens the economic competence between insurance companies. The resulting tight economic competence then drives each insurance company to produce high-quality annuity proposals that will attract more consumers and that would make their old clients keep their trust and confidence in the company. Second, the 1035 Exchange provision helps remove economic inefficiency by allowing consumers to exchange assets that are closely substitutable without being discouraged by taxation. This may guarantee that unproductive annuity plans available in the market will eventually be eliminated if consumers will watch their backs in the annuity game and take advantage of the 1035 Exchange provision.

A Further Look at Equity Index Annuity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Pros and Cons of Equity Index Annuity

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

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

The Pros

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

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

The Cons

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

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

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

How to know if Equity Index annuity if right for you

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

Annuity for Retirement: Pros and Cons of Equity Index Annuity

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

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

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

Pros and Cons of Equity Index annuity

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

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

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

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

Features of Equity Index Annuity

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

Comprehensive Guide to Understand the Deferred Annuity

In getting to know about what is annuity, there’s always the need to explore every aspect of the topic. Annuity is a unique viable investment means that can help you enjoy steady flow of income when you go for retirement. It’s a kind of contract you sign with an insurance company whereby you invest your money as a lump sum. The insurance company pays you a certain income amount on an agreed date.


When considering what is annuity, you need to discover more about its various forms.  There’s what is known as “Deferred Annuity”.  It’s a unique contract that usually delays   your income payment for a long time.  You have to enter into agreement with your insurer as regards when you want the payment to be made.  In most cases, you have to leave your investment to grow and mature for a long time before you think of making withdrawals.

A deferred annuity is usually known for having 2 phases. There are the savings phases whereby you’re expected to invest your lump sum into the deferred annuity account. The other phase is the income phase.  Your investment is turned into a unique annuity that gives you the room to receive payments at agreed dates. You simply enter into agreement with your insurer as regards when to receive payments.

Deferred annuities can be variable of fixed.  The deferred variable annuity allows you to receive payments on a specified variable date, which you’re expected to choose.  On the other hand, the fixed deferred annuity allows you to receive payments on particular fixed date. The choice is always yours to make when it comes to any kind of annuity type.

When exploring what is annuity under the deferred annuity option, you must consider other features. For instance, you’re not expected to receive any income payment until the agreed date is reached.  You or the insurer will not break the agreement for any reason.  The terms and conditions always apply.

Again, your deferred annuity has lifetime benefits. If for any reason, you die before the agreed payment date is reached, the income payments will also be made to your beneficiary when the time comes.  In most cases, your spouse or your child   should be added as a beneficiary when you sign the contract deal.  There’s also the need to get your beneficiary properly informed about your investment. This will help him or her to know the right steps to take when the time comes.

Meanwhile, deferred annuity can help you gain a lot of tax benefits. You’re not expected to pay any tax until you’re ready to make your cash withdrawal at the appointed time.

From the above, you must have known what is annuity as it pertains to the deferred annuity type. There’s always the need to be properly informed before you decide to invest on any kind of annuity. If you’re confused, don’t act. Let a good financial adviser show you the right step to take.

Overview of the 1035 Exchange

1035 Exchange is simply the section of tax code that offers investors the flexibility to exchange one kind of annuity for another without having to incur any kind of immediate tax liability.  If for instance, you’re currently investing in one annuity for retirement type and you decide to switch over to another type, the 1035 exchange can easily help you out.  All you need is to follow the rules.


Actually, annuity for retirement can become a good investment opportunity when it’s working well for you.  It’s a kind of contract you enter with a reliable insurance company whereby you invest a lump sum in the company’s product. In turn, the insurance company guarantees you income payments on agreed date.  You can easily change one type of annuity with another through the 1035 exchange program without incurring any tax liabilities.

In most cases, the 1035 exchange is mainly used when an annuity holder decides to upgrade to a more favorable kind of annuity for retirement   type without hoping to be bogged down by any tax constraint. Oftentimes, the tax liabilities are encountered when you want to surrender an existing annuity contract for another.  However, with 1035 exchange, you’re sure to scale through the tax liabilities.

Usually, when annuity for retirement contract is being changed for another under the IRC section 1035, the transfer is normally considered a non-taxable situation especially if you’re able to meet the necessary requirements. There are basic terms and conditions usually involved in the   1035 exchange. You need to scale through them in order to completely avoid the tax liabilities that come with exchanging one annuity with the other.

Oftentimes, annuity investors do have some cogent reasons for initiating the 1035 exchange option within the current retirement plans they may have.  Some of the reasons may include   high interest rates, change in financial strategy, and other conditions.  One may decide to initiate the 1035 exchange to gain improved benefits on the retirement plan he or she has been using.  The major goal of the exchange is simply to enjoy more benefits from the kind of annuity investment you’ve been having.

Meanwhile, it’s important to note that the process of 1035 exchange should never be rushed. You don’t engage in it as you like.  You must be properly guided. It’s very important to engage a good financial advisor to help you check the stand of your annuities before initiating the 1035 exchange.  The financial advisor will go through the profile of the insurance company holding your current annuity contract in order to determine the stand of the annuity before you can ever think of initiating a change. If there’s no need for any kind of change, the advisor will let you know. He will check if there are surrender charges or penalties that will be imposed on your current annuity when you change. This prevents you from losing your investment.

It’s important to take your time to consider all the   options before changing whatever annuity for retirement plan you’ve been having. You’re sure to benefit a lot from the process if you take your time.

How to Identify the Features of a Good Fixed Annuity

As more and more people insure their future lives there are those still not yet decided on the best way to safeguard the retirement income. Well, it is common knowledge that as you grow older so will your industrious ability reduce. This is not to say you become redundant but rather in comparison with the young blood around you become more like your children’s advisor rather than the one who actually does stuff after all shouldn’t one take a long vacation after working for all those years? That’s why you will need to plan ahead of this time, at least ten years in advance. One of the most popular and reliable investment decisions is taking up a fixed annuity. It is a contract that lets you give a certain amount of money either in lumpsum or in premiums to an insurance company which after an agreed period of time pays back the money in lumpsum or in installments and of course with a good interest income.

Its underlying principle is that a fixed annuity is supposed to be one of the safest investments around. Whenever one puts their money into one then a sure return is sure to come your way. Your money is usually invested in the most reliable ventures that have guaranteed returns like the government bonds or the corporate ones. This in return means that you don’t have control where the money is invested in. The returns though relatively lower than in the other annuities are sure.

The interest for fixed annuity offered for the first few years, which is also called bonus rate, is usually higher. The lumpsum or the premiums paid today earn an interest, which is compounded. At the end of each year, the previous years’ interests are compounded and they are allocated an interest, in short your interest grows as well as your premiums. This would not be the case in other investments where your interest though compounded is withdrawn regularly.

Withdrawals are supposed to be done in a future specified date or starting on a future specified date. The payments will start being made between one month after the annuity’s maturity and thirteen months, it all depends on the annuity’s terms. The withdrawal of a fixed annuity either can be in lumpsum or as many prefer a distributed payment package that ensures a standard flow of income to the annuitant. Withdrawals can also be made in case the annuitant passes on, confinement to a nursing home or a terminal illness befalls the annuitant, all these withdrawals will be made free of charge. If you happen to be below 59.5 years and wish to withdrawal your annuity then you will be charged the surrender charge, which could be as high as 25% of your money not forgetting the 10% tax still on your money. It is quite expensive to withdraw before maturity.

In conclusion, we can say that taking a fixed annuity is the best retirement decision that one can make today. It ensures your life continues smoothly.

Four Simple yet Important Factors to Consider before Taking up a Fixed Annuity

Like any other important decision in your life taking up a fixed annuity is a very important decision that will not only affect your net income but also your lifestyle as well. As the world becomes more aggressive with regard economic wealth one should be prepared currently and even more for the time when one is not in the same physical and mental state to cater for their daily necessities. In order to try and safeguard their future a lot of people will take on investment decisions that in their view just do this. Of course, some pay off and one gets an excellent retirement package while other investments leave their owners open mouthed, shocked and unsure of what to do with their lives. To avoid such nasty surprises some research would be helpful even when taking up a fixed annuity. There are some factors to be considered while evaluating whether to take up a certain annuity.


The most important factor would be to check whether the interested offered is guaranteed as purported. Check the factors that would reduce this rate with each insurance company; some offer very good rates say, 8% return but their charges total up to 4%  thus remaining you with only 4% to enjoy while you could have taken one that offered 6% return but their charges total up to 1.5%, this will leave you with 4.5% to enjoy. In annuity circles, 0.5% is quite a substantial difference because this runs for at least 10 years. We can summarize this by saying that you need to compare not only the fixed annuities but also the different other investment opportunities around you.

Ensure that that the payout is right for you. In view, that this is a long time commitment, you need to plan ahead and know that this is money that should not be touched for the required goal to be achieved. The time before you receive the payout is important because you don’t want to plan for the next 3 years whereas the plan is for 15 years.

While considering the best investment decision to make risk is a major factor that comes fore. Unlike other annuities or investments, a fixed annuity plan will always give secure reliable returns. Its premiums are invested in government bond or the very good performing company bonds that have a reliable return and are guaranteed. This assures one that their savings will never lose value because some stock bought by your insurance company lost ground at the stock exchange.

Moreover, it is always good to check out the company’s history, the insurance agent should be in a position to provide you with these details. Take note though that in business as well as life in general the future is not necessarily an image of the past though the past helps us making wiser decisions. While you are still at checking the company’s history don’t forget to check whether the insurance company you are eyeing for licensed fixed annuity.

Deferred Fixed Annuities: The Ultimate Guide

Deferred fixed annuity refers to the annuity that has a guaranteed fixed rate for a stated period. When someone buys one, his or her money is placed in the general account of the issuing company. Many situations depend on the annuity contract shared by the annuitant and the annuity company. The company might adjust the rate periodically. That is why the best time to buy an annuity is when it offers a high interest rate. There is also a specified interest rate backed up by the insurance company for a specified period. Some insurance companies may guarantee different interest periods with varying interest rates. Again, this is all written in the contract. The buyer must always make sure to read it carefully before buying it.

Depending on the contract, other options are laid for the annuitant. Like for example, some give withdrawal options. Some may allow surrendering the annuity contract without paying a surrender charge.

FindAnnuitiesDeferred fixed annuity may offer a guaranteed minimum rate of interest. Once the rate is set for the period, it will not be subject to fluctuations brought in by market interest rate or the investment’s previous performance. However, deferred fixed annuity also offers only a little flexibility. There will be no adjustment for inflation and the potential for growth is lesser than other annuities like deferred variable annuity.

Imagine saving up in a piggy bank. That is what deferred fixed annuity looks like. The will be collected during the accumulation period which will grow the tax deferred. When the contract’s expiration comes which is usually after 5 to 10 years, the accumulation phase ends and the dispersion of money starts. Payment could be dispersed by either in a lump form of money or in smaller monthly payouts. The annuitant can also choose to continue the annuity contract with a new rate and within a new period.

Even though deferred fixed annuities originally intends to accumulate money and let that money grow without interest until the accumulation phase ends, premature withdrawals are still permitted by most companies. A withdrawal allowance of 10% is given to the annuity holder every year by some companies. This means that, 10% of the accumulated income can be withdrawn without incurring penalties from the IRS.

When is the right time to buy a deferred fixed annuity? Who should buy it? Deferred annuities and immediate annuities are designed to fulfill different purposes. Immediate annuity is appropriate if someone requires a consistent monthly income, as for retirement. Deferred annuity may be a better option for someone who does not need the money right away and want to stash it for the future use after retirement. If a person is already retired and wants to buy annuity, the choice is up to him depending in his or her situation. When he or she needs a steady monthly income, then, immediate fixed annuity is what he or she needs. If he or she just wants to save for his or her retirement or does not need the money for that time, deferred fixed annuity might be one of the best choice that he or she can opt for.

Fixed annuities like deferred fixed annuity should be viewed as conservative and suitable for those who are nearing retirement or already retired. Click here to enter your zip and to start determine if deferred annuities meet your savings goal. Start comparing now.