- Principal grows income tax-deferred
- Earnings grow income tax-deferred
- Money that may have been used to pay taxes
grows income tax-deferred
- Your client decides when to pay
taxes.
- Income taxes are paid when earnings are
distributed.
- Even after taxes are paid, the tax-deferred
annuity grows more quickly than a fully taxable vehicle.
- Upon death, a benefit will be paid to the
named beneficiary. The amount paid is usually the accumulated value
versus the surrender value; however, this varies by product.
- Annuities typically avoid probate
Both the fixed and the indexed annuities avoid probate, the work
probate means "to prove". Probate is required when a person passes
away and their assets need to be distributed. Each state has
different rules, but in general the estate of the deceased person
needs to resolve any outstanding debts before the estate assets can
be distributed. Heirs are required to wait until any outstanding
liens or past debts can be satified from the deceased assets.
A probate attorney gathers the assets and presents to the court
any claim being made against the estate. This porcess may take
between 6 months and two years depending on the complexities of
these settlements. The average cost the probate attorney charges
are between 4% and 7%.
Annuities have a beneficiary clause that allow annuity assets to
avoid probate thus avoiding time delays and attorney probate
fees.
Bank products like CD's, money market accounts or savings accounts
can acure interest that is taxable - annuities are tax deffered.
Remember, it is not how much you make but how much you keep.
Each annuity product is designed with a specific purpose in mind,
finding a qualified advisor is critical in assisting you in the
decision making process.
- Many different options to access
money
- Varies by product and company
- 10% penalty-free withdrawal after the
1stcontract year
- Systematic monthly withdrawals of
interest
- Annuitization
- Nursing Home or Hospital Confinement Waiver
- Varies by product and company
- Waives a portion of the surrender charges,
some policies waiver all the surrender charges, if your client is
confined to a qualified nursing home or hospital
- $100,000 investment looses 20%
- Value is $80,000
- $80,000 Investment goes up
20%
- Value is $96,000
- $80,000 Investment needs to increase 25% to
equal the original $100,000 investment
- Accumulation Phase - Growth
- All earnings grow income tax-deferred until
withdrawn
- Annuitization Phase - Income
- A guaranteed income is paid for a set period
of time or for life
- Less than 10% of all annuities are annuitized
because of systematic withdrawal feature. Most annuities allow for
a 10% penalty free withdrawal after the first year of
ownership.
- Meaning:
- The process of converting an annuity value
into a series of periodic income payments.
- Typically may be done at any time.
- Surrender charges may be waived.
- The carrier may waive the surrender charges
if the contract is annuitized.
- Payout Options (differ by product)
- Life Only
- Life with Period Certain, most common
- Life with Refund or Installment Refund
- Period Certain (no life contingency)
- Fixed Amount
- Joint & Survivor
- Interest Only
| Initial Premium |
$100,000 |
| Assumed interest rate (all years) |
5% |
| Accumulated value at the end of Year 5 |
$127,628 |
| Current Monthly Income* |
$629.28 |
| Percentage of each payment that may be
excluded from taxable income |
75.7%
|
One of the most common forms of money that may be used to purchase
an annuity contract are those monies that are rolled over from an
existing retirement account like a 410K retirement program. As
employees change jobs they prefer to take their retirement accounts
will them rather than leaving them with the old employer. To avoid
taxation the employee requests that his/her existing retirement
account be "rolled over" into an individual IRA account so that
he/she maintains control over their money.
Last, those persons who have existing accounts with other
insurance companies and wish to move their account to another
insuring company may do so by means of a "1035" transfer. For
example: Client A wishes to transfer his/her assets to another
insuring company. The existing monies inside insurance company
"A's" policy may be transferred or rolled over into a new account
with company "B". Once the proper paperwork and instructions for
the transfer have been completed, Company "B" approaches Company
"A" and arranges for the monies to be reallocated. An insurance
product like a cash value life insurance or annuities may be
subject to early surrender charges. Check with your financial
advisor to make sure your insurance product is outside its
surrender period.
Annuity products have changed and evolved over the years, some
newer policies may include long term care and/or home health care
options. Policy holders may wish to take advantage of newer,
broader language in current policies.
