The proceeds from an annuity death benefit are taxable when they are received by the beneficiary. In the case where the recipient is a surviving spouse, he or she can initiate certain measures to defer the payment or taxes on the amount received.
In other instances where the recipient is not the spouse, the recipient will have to pay taxes on the money he or she receives from the annuity. Depending on who the beneficiary is, these funds may be subject to estate taxes as well.
Before deep diving into this, it may be useful to have a clear understanding of what an annuity is. A simple way to think of an annuity is to refer to it as an insurance product that offers a certain income benefit, backed by contractual guarantees. It can be utilized as a component of a retirement benefit plan.
As an individual, you can purchase the annuity by paying a lump-sum premium payment or by making several premium payments over an extended span of time. The annuity premiums are allocated into the annuity contract, and the annuity owner receives benefits as the money grows over time.
While researching your retirement income options, you have probably come across the concept of annuities. Chances are the general idea of annuities is pretty straightforward. But once you start digging deeper and reading through the different annuity terms and concepts, things may start looking a bit more involved.
If you are thinking about buying an annuity, then one decision that you will make is whether to opt for a qualified or a non-qualified annuity. The good news is that these terms apply to all of the different types of annuities: fixed, indexed, variable, and so on.
The difference between the two is the type of money you may put in them: after-tax dollars or income that you haven’t yet paid taxes on, pre-tax dollars.
While this is the essential difference between qualified and non-qualified annuities, knowing the basics of both types can help with making a well-informed decision.
So, let’s get into the basics of a qualified annuity versus a non-qualified annuity. Read More
Have you ever heard of a market value adjusted annuity? If you are planning for your retirement income, then you may be considering an annuity as one of your options. Of course, there is a number of possibilities when it comes to purchasing annuities. So, it is important to understand clearly what annuities are so you can make sound financial decisions.
In cases when you are looking for tax deferral and an instrument which can offer safe growth and reliable future income, a fixed annuity can be the perfect option. These typically entail an average contract of seven to twelve years and guarantee a minimum annual interest rate. While the duration of the contract and interest rates are important to consider, you should also take into account whether the annuity is subject to a Market Value Adjustment (MVA). It’s common for an MVA to be attached to fixed annuities, and as you probably noticed, it’s these contracts with an MVA that are called “market value adjusted annuities.”
Before making a decision, it’s important to know what a market value adjusted annuity is. So, let’s get into it. Read More
Do annuities make sense for your retirement portfolio? Well, when used right they can be a very powerful financial vehicle, especially for retirement. Annuities allow an investor to pay a lump sum of money upfront and then receive an income stream in return for a set period of time. The insurance company is bound to provide this income stream by contractual guarantees. The income stream can last anywhere from a set duration to a lifetime.
Here’s a quick look at some annuity basics and other helpful tips to consider. Read More
After years of hard work, all of us want a comfortable retirement. But it may be unclear as to what we need to achieve this. What steps are necessary for a worry-free financial life – the ability to spend with confidence?
Part of it means a transition in thinking. In real-world terms, it encompasses a shift in focus from asset values to monthly income. We want to be sure we have sufficient cash-flow for funding a retirement lifestyle. On the other hand, we should also be attentive to the matter of preserving wealth. With all those savings accumulated over many years, our money will now need to last for the rest of our lifetime.
However, this doesn’t mean that savings growth has to be put on the back-burner. For Americans looking for “safe money financial” vehicles, annuities may be attractive. In particular, fixed-type annuities can offer guaranteed lifelong income, tax-deferred accumulation, and growth via guaranteed interest rates or rising index values.
If you are investigating fixed annuities or fixed index annuities for personal growth or income goals, here’s a quick look at a few variables to consider. Read More
As many of us know, October is the renewal month for many bank certificates of deposit. Some common selling points for bank CDs are low risk and steady earning potential. But today’s low interest rate environment throws some real curveballs for retirement savers.
In fact, CD rates have remained low for some time now. And what interest rates might be in the future still remains unclear. With the diminished prospects for wealth accumulation, many people seek an alternative to bank CDs and their low yields.
When used properly, annuities are often tapped as transfer-of-risk strategies. Many Americans rely upon them for lifelong income security, dependable asset protection, or other financial assurances. Nevertheless, annuities of the fixed variety – particularly fixed index annuities (FIAs) and multi-year guarantee annuities (MYGAs) – can also offer value as tax-efficient savings vehicles.
If you are looking for alternatives to CDs, here’s a quick look at fixed index annuities and multi-year guarantee annuities – and how they can differ from today’s low-yield bank CDs as retirement-savings solutions. Read More
Record numbers of Americans are retiring. According to the U.S. Census Bureau, there will be over 80 million retirees by 2040. Life expectancies are on the rise – people are living longer. And a large proportion of Americans worry about market risk. They get anxious over how the stock market performs or fear potential losses.
Because of these and other reasons, some Americans have been adopting annuities as transfer-of-risk strategies. They want the guarantees associated with these contracts – particularly the assurance of lifelong income, for many annuity buyers. For those of us worried about outliving our money or other income-related risks in retirement, this raises an important question: “Should an annuity be part of my income strategy?”
It’s indisputable that many Americans desire guarantees in their financial plan, and this number continues to grow. But that doesn’t mean annuities are right for everybody. If you are wondering whether an annuity is for you, here’s a quick look at some situations you may want to consider. Read More
In previous blog posts, we’ve discussed financial products offered by insurance carriers, such as annuities. But what if an insurance company fails? What then happens to your money in the annuity or financial solution issued by that insurance carrier?
In the context of “Safe Money” – or money you can’t afford to lose – it’s worthwhile to discuss bank failures as well as insurance company failures. After all, bank options and annuities are two ways of preserving your wealth from the effects of market downturns. They’re means of keeping your hard-earned money safe.
Ultimately, it begins with two components: security and guarantees. It’s important to clarify exactly what anyone in the financial industry means when they use the term “guarantee.” In the case of insurance companies or banks, it refers to financial reserves they hold in cash or cash-equivalent securities. These reserve holdings are allocated toward ensuring a promise or guarantee.
For banks, the guarantee means you’ll always be able to get your money back and not suffer a loss. The Federal Deposit Insurance Corporation (FDIC) is tasked with insuring savings accounts against future bank failures. But the FDIC and its involvement come with many misnomers, some of which the American public is largely unaware. And they amount to strong differences from the guarantee offered by an insurance company, too. Read More
Today’s financial landscape is muddled. Determining the best investment options for your needs can be a hassle. Sound decision-making involves being financially educated. And for people looking at annuities, it helps to understand the basics.
What is an annuity? Simply put, an annuity is a contract between you and the insurance carrier providing it. The goal of an annuity is to provide you with a steady income stream in your retirement. It can also be a means of protection – keeping your retirement money safe and intact when market-based investments take a hit. In an annuity contract, you make a lump-sum payment or a series of payments. The annuity gives you certain contractual guarantees. Read More
Are you looking at annuities for an income security option? There’s certainly no shortage of financial advice on them out there. Especially bad financial advice.
And as financial guru Suze Orman notes, it’s a different world. Employers no longer look out for you in your working days – and then offer a pension throughout retirement. Now they ask you to help fund your retirement. Or you may be tasked with funding your retirement entirely on your own.