Retirement planning is an essential step in financial life. Part of the transition is to ensure that your money is safe and you have income available for the rest of your life. For risk-conscious and lifestyle-minded investors, one instrument to consider for a retirement portfolio is an annuity.
Apart from principal protection, low risk, and tax-deferred growth, annuities can generate a guaranteed lifetime income. This income benefit can help ensure that the contract owner has a constant, dependable cash-flow throughout retirement.
However, there are many aspects of an annuity that people should understand before making a purchase, such as fees and conditions. One of the important conditions set out by annuities are surrender charges.
Let’s take a closer look at what a surrender charge involves. Read More
Year after year, many Americans are finding it harder to provide for their spouses during retirement. Guaranteed pension payments have been disappearing as more companies move toward 401(k)s and other savings plans. And with the end of file-and-suspend in Social Security, numerous couples now can’t use the higher earner’s wage record for greater benefit payouts.
This brings up the question of survivorship: How can retirees ensure their spouses receive sufficient income for current and future needs? Many couples have turned to joint life annuities as a long-term solution.
However, that doesn’t mean that a joint life annuity is right for everyone. In some cases, having separate annuities can be more prudent. Or it may be appropriate to seek retirement income strategies with other means. But no matter what, whether someone should choose a joint life annuity or a few single life annuities will vary on an individual basis. It depends on the potential buyer’s needs, goals, and situation, among other factors.
If you are considering a joint or single annuity, here are some pointers to help you think about your options. Read More
Yes, it’s possible to buy an annuity at nearly any age. Usually there are few or no lower age limits. But annuity purchases do have older age limits. These restrictions vary based on annuity type, product, and individual contract rules.
Technically, you may be able to buy an annuity for even a child. However, most annuity purchases are with retirement money, especially IRA money. So, annuities tend to be more appropriate for people of near-retirement and retirement age. You will also see retirement savers in their 30s and 40s purchasing annuities for principal protection, safe growth, or tax-deferred accumulation in another place alongside retirement accounts. Overall, annuity buyers tend to range from ages 40-80, depending on their needs and goals.
In the 2013 Gallup Survey of Owners of Individual Annuity Contracts, the average age for first-time annuity buyers was 51. The survey found the median age of first-time contract purchasers to be 52.
People who own annuities have something that not only can take care of their financial needs, but also provide money even after their death. In addition to benefits for owners, an annuity can be a valuable inheritance for beneficiaries, like spouses, or other persons. Certain benefits can become available to beneficiaries when a contract owner passes away.
As the contract holder, you may setup your annuity in ways that will take care of your loved ones, even when you are not with them anymore. The amount of money available after your death will depend on the type of death benefit offered by the specific annuity you have. Let’s get into more details of what happens to an annuity when someone passes away. Read More
Are you considering different annuity options for your retirement portfolio? An annuity is a type of insurance product, purchased from a life insurance company and/or an annuity company. Annuities are popular retirement options due to the safety they offer for your money, the potential for tax-deferred growth, and their reliability for giving permanent, lifelong income.
That being said, sometimes it can be confusing when you try to make sense of different annuity types, contract features, benefits, and downsides. Since you would commit a sum of your money to an annuity contract for a period of time, it’s prudent to do research and develop an understanding of your annuity options before committing to any financial decision. Here is a short guide to help you get started on understanding the different annuity options. Read More
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
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