Select Annuities Examples
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Institute we understand that the key to successful investment
strategies with Annuities comes from taking the time to truly
understand your unique life requirements. Our national network
of qualified senior planners and financial consultants are very
experienced at taking the time to truly understand your unique
requirements. Through discussing your personal needs, expectations
and financial goals, we are able to ensure that the guidance and
advice we provide is best suited for your individual needs.
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Some of the more popular annuities include:
Single Premium Deferred Annuity
A single
premium deferred annuity, or SPDA, is an annuity you purchase
with a single payment. You get a guaranteed interest rate for
a specified period of time, and the taxes on the interest you
earn are deferred until you make a withdrawal. Single Premium
Deferred Annuities are ideal for anyone who wants to let their
money grow risk-free while deferring income taxes, with the goal
of creating income later in life.
Immediate Annuity
An immediate annuity guarantees the holder a fixed monthly income that starts as soon as the investment is made. The income then continues for the rest of your life, with the amount set based on the size of your investment, your age, current interest rates, and the maximum time you have chosen for the company to pay out - even if you were to die. If you hold an immediate annuity outside a retirement account, part of each monthly payment is considered a return of principal, so that portion of the income is not taxed. The return of principal along with interest your funds are generating causes a higher monthly payment than you could probably get elsewhere on a guaranteed basis.
Split Annuities
A split annuity is a very tax efficient and intelligent investment vehicle combining two different types of annuities - a single premium deferred annuity and a single premium immediate annuity. One annuity repays you a set sum of money each and every month over a specified period of time. The other annuity is left in place to grow on a fixed interest basis, with the goal being that by the time funds in your immediate annuity are depleted, the single premium deferred annuity will be restored to your original starting principal. This allows you to then restart the process with new prevailing interest rates.
Equity Indexed Annuity
Equity Indexed
Annuities were established in the mid-1990's by insurance companies
to compete with very popular indexed mutual funds. The index annuity
tracks a particular stock-market index, such as the S&P 500, NASDAQ,
or DOW, with the rate of return usually being a set percentage
of the increase that index shows in a given year. This is a very
attractive annuity for many investors because the principal investment
is protected and guaranteed from losses in the equity market,
while gains add to the annuity's return.
Individual Retirement Account (IRA)
An IRA is a tax-advantaged personal savings plan that lets an
individual set aside money for retirement. All or part of the
participant's contributions may be tax deductible, depending on
the type of IRA chosen and the investor's personal financial circumstances.
Distributions from many employer-sponsored retirement plans may
be eligible to be rolled into an IRA to continue tax-deferred
growth until the funds are needed. In the year 2001, you can contribute
up to $2000 to your IRA. If you are married, you can also contribute
up to $20000 more for your nonworking spouse.
Roth IRA
With a Roth IRA, you may not deduct your contribution, but your contributions can grow income tax-free. When you withdraw money from a Roth IRA at retirement, you will not owe any taxes on that money, no matter how much the money has grown in value, provided you have followed IRS guidelines. In addition, you can withdraw your own contributions at any time without penalties or taxes, regardless of your age and how long the money has been in the Roth IRA. Any gains or earnings however must stay in the Roth IRA until you have turned 59 ½ and you've held your account for more than five years before you can withdraw them without tax liability. A Roth IRA allows you to amass a lot over the long term in exchange for not taking a tax deduction now. Plus you do not have to begin taking withdrawals at age 70 ½ as you do with traditional IRAs.
Medicaid Annuity
A Medicaid
annuity is a fairly new loophole that helps individuals going
into a nursing home down size their personal assets, allowing
them to qualify for Medicaid assistance. The way a Medicaid annuity
works is an elderly person desiring to go into a nursing home
hands over almost all of their assets to an insurance company.
The insurance company then agrees to send it all back, with interest,
in monthly payments over a few years. The person no longer has
significant assets, but does have a steady income stream, and
is now made eligible for Medicaid. Since Medicaid won't cover
nursing home care if an individual has assets of more than about
$2,000 (not counting a house or car), a Medicaid annuity can be
a critical tool in ensuring future capability to meet personal
care costs without losing everything you have.
Charitable Annuity (Gift Annuity)
A charitable gift annuity is a contract between a donor and a
foundation, under which the foundation guarantees payment of an
annuity, unlike a trust which pays the annuity from its assets
alone. Two features in particular make charitable gift annuities
appealing. An individual may specify whether he or she wants an
immediate annuity, with payment to begin not later than one year
from the date of the gift, or a deferred gift annuity, from which
payments are not to begin until a specified future date. In addition,
the income stream from such an arrangement can be higher than
current market rates.
Variable Annuity
With billions
of investment dollars going into mutual funds, insurance companies
created a competing product called Variable Annuities that allows
you to invest your money within investment portfolios called subaccounts.
Unlike other annuities, a variable annuity does not guarantee
a set rate of interest or earnings, being based instead off fund
performance and account averages. However you can buy, sell and
switch funds at any time without incurring taxes until you begin
to withdraw your original investment and income after age 59 ½.
At that time your gains are taxed as ordinary income.
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