One stop shopping for all of your annuity rates and annuity quotes needs, as well as the tools and information required to learn about, compare and buy CD-Type Annuities, Fixed Annuities, Equity-Indexed Annuities and Immediate Annuities.
Itís detrimental to have too much money allocated to risk in stocks or mutual funds, as a percentage of total cash assets and age. Over time, more risky investments should be moved into safe and stable investments such as Annuities.
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Annuities Vs. CDs
Annuities and CDs (bank certificates of deposit) are similar in that they are safe, secure investments with guaranteed rate of returns based on interest rates, both issued by large financial institutions, CDs issued by banks, Annuities offered by insurance companies, but they both possess inherent differences as well.
The big differences are that while Annuities offer everything CDs offer, they carry several advantages. Generally Higher returns
CDs do have FDIC protection to guard against Bank or banking industry failure, but Annuities also have safety measures put in place by the state to ensure Insurance companies have reserve pools in place. Insurance companies may also be vetted for financial strength by obtaining their rating from objective rating firms -- Standard & Poor's, Moody's, A.M. Best or Duff & Phelps. The more solid the rating usually equates to a more solid financial backbone of Insurance Company.
Annuities, like CDs, are hinged to interest rates. But when rates are low so are CD returns whereas annuities have a minimum guarantee in place, usually 3% or 4%. Your investment will never dip below the guaranteed minimum interest rate during times of falling or low interest rates.
Again, low interest rates mean CD returns will be low as well. To offset the problem of low or falling interest rates, insurance companies equip annuities with guaranteed minimums. This is an agreed minimum rate of interest so that your investment is assured not to fall below the minimum performance even if CD rates do.
You pay annual taxes on CD interest earned without being able to withdraw funds until your investment term is over. With annuities, there is also a set term, but the earnings are tax-deferred. You only pay taxes on interest earned when money is withdrawn. So with annuities the deferred tax on your interest remains in the investment earning you more and more money, instead of being paid out to state and federal tax agencies on a yearly basis.
CDs do not allow you to withdraw any monies during term. Period. Annuities have provisions that allow you to withdraw money, generally 10% of your account value annually plus many contracts allow you to remove the earned interest on a monthly basis. Several other contract provisions allow you access to all of your funds such as in the event you are hospitalized, undergoing a life-threatening illness, subjected to a permanent or extended stay in a nursing home, or other major calamities that affect you economically. In addition, annuities can be structured to pay-out for the life of the owner over a fixed term such as five or ten years, thereby spreading out your tax-burden and providing enhanced income security. In short, Annuities offer enhanced flexibility.
Is Your Annuity Company Giving You The Best Deal?
Many annuities offer a great rate to start, but then you see the interest rate drift down after the first year. Have you noticed that your annuity interest rate keeps falling? Have you even paid attention to it?
Most people are pretty good about making sure that they're getting the best rates on their bank CDs, credit cards, car insurance, even their mortgage. We all know that you can save a ton of money by simply shopping for a better deal.
Not nearly as many people realize that you can - and should - do the same kind of competitive review of your existing annuity plans. Even fewer people know that you can easily trade-in an older, possibly under-performing annuity for one that better suits your needs, and with no out-of-pocket expenses or current taxes to pay!
Two Main Annuity Types: Immediate and Deferred
The difference between deferred and immediate annuities is just about what you'd think.
With an immediate annuity, your income payments start right away (technically, anytime within 12 months of purchase). You choose whether you want income guaranteed for a specific number of years or for your lifetime. The insurance company calculates the amount of each income payment based on your purchase amount and your life expectancy.
A deferred annuity has two phases: the accumulation phase, where you let your money grow for a while, and the payout phase. During accumulation, your money grows tax-deferred until you take it out, either as a lump sum or as a series of payments. You decide when to take income from your annuity and therefore, when to pay the taxes. Gaining increased control over your taxes is one of the key benefits of annuities
The payout phase begins when you decide to take income from your annuity. For most people, this is during retirement. As your needs dictate, you can take partial withdrawals, completely cash-out (surrender) your annuity, or convert your deferred annuity into a stream of income payments (annuitization). This last option is essentially the same as buying an immediate annuity.
Annuities, although usually purchased in order to provide a source of income for retirement, are occasionally used to shelter assets so that individuals purchasing them can become eligible for Medicaid.
An annuity could protect your savings
There's a good chance you will live for many years after you retire. The average 65-year-old will live an additional 17.8 years. A healthy percentage of retirees will live much longer.
But as Americans are living longer, many worry they'll outlive their money. Events of the recent years have stoked those fears. Many retirees have seen their stock investments savaged by the bear market. Those seeking sanctuary in money market funds and certificates of deposit have seen their income evaporate.
The financial services industry has a solution: it's called an immediate income annuity. These products offer a way to ensure you'll receive a check every month for as long as you live. Immediate annuities provide a way to create your own pension, using the money you've saved for retirement.
When you buy an immediate annuity, you give an insurance company your money in exchange for a guarantee that you'll receive a monthly check for the rest of your life or for a specific period of time. The amount of the payment you receive will depend on several factors, including your life expectancy and the age of your spouse if you include a spouse in your coverage.
What you should consider before you buy an immediate annuity:
Control of your money
Even the biggest supporters of immediate annuities say you should only use them for a portion of your retirement savings. The reason: Once you hand over your money, you're locked into the agreed upon monthly payment. If you underestimate your expenses or need money to buy a new car or for an emergency, you cannot get money from your annuity. An immediate annuity cannot be cashed in.. It is an irrevocable one-time purchase.
If you buy an immediate annuity that just provides payments for the rest of your life, the payments will stop when you die. There will be no residual payment to your heirs, even if you die shortly after buying the annuity. However, there are ways to remedy this problem: You can set up the annuity so that it may outlast your lifetime. How? If you're married, you can buy a joint and last survivor annuity, which continues payments as long as you or your spouse is alive. If you're single and have beneficiaries, you can add a clause to your annuity that guarantees payments for a specific period, ranging from 10 to 30 years, if you died before the end of that period. In this case, your beneficiaries will continue to receive payments until the period expires. Of course, the longer the term you add to your annuity the less you receive in monthly payments. Nonetheless, this cost may be worth it since the income will continue to be paid to your heirs after you died.
Most fixed immediate annuities provide a level payment for the rest of your lifetime. Some companies offer a fixed level Cost of Living rider which you can elect at the time you purchase your annuity. This sets up an annual percent increase to the amount of your income. In return for a larger paycheck in your later years, you will give up some income in the earlier years.
When you buy a fixed immediate annuity, you pay no loads nor management fees. That's surprisingly true for most fixed-type annuities. (If you buy a "variable" annuity, however, you will pay what's known as a "mortality and expense" fee plus an investment management fee.) There are no sales fees or back-end charges when you buy a fixed immediate annuity.