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HOW ANNUITIES WORK
An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments.
Annuities typically offer tax-deferred growth of earnings such as Index Funds with no risk, and may include a death benefit that will pay your beneficiary a specified minimum amount, such as your total purchase payments or payments with growth. While tax is deferred on earnings growth, when withdrawals are taken from the annuity, gains are taxed at ordinary income rates, and not capital gains rates. If you withdraw your money early from an annuity, you may pay substantial surrender charges to the insurance company, as well as tax penalties or if your under age 59 1/2 which like a IRA, may incur a 10% penalty. |
ANNUITY BOOK (Download your copy) 
How Much Risk is Acceptable? 
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FOUR MAIN TYPES OF ANNUITIES
There are four basic types of annuities in the marketplace and each one has it's own features. We will share some basic details below that can help you better understand how these work. We also suggest you reveiw an Annuity Illustration and ask questions prior to your purchase of such a product.
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SPIA INCOME ONLY
Single Premium Immediate Annuities requires a lump sum of premium in exchange for a lifetime income based upon life expectancy. In most cases there is a PERIOD CERTAIN option that continues to pay a beneficiary should you not outlive the specified period selected. Income starts immediately and your access to premium paid is gone. There could be better options!!! 
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FIXED GUARANTEED RATE
OR A FLEXABLE RATE Fixed Annuities offer a Guaranteed or Flexible rate for a term that has been chosen. Most common is a 5 year guaranteed rate that ranges from 2.5 to 4% depending upon the marketplace environment at time of purchase. Fixed Annuities are often used to grow money safely and with a rate that is many times higher then a bank along with a tax deferral option better than CDs. 
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FIXED INDEX NO MARKET RISK
Fixed Index Annuities allow you to select a market linked index without the risk. You will choose an index that provides you potential interest rate based upon the index performance using a choice of a Cap, Spread or Participation Rate. There is NO MARKET RISKS and in most cases NO FEES in most cases, but there are exceptions on some options available. Look at the Index Performance 
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VARIABLE MARKET RISK & FEES
Variable Annuities are directly invested into the market through sub-accounts, much like mutual funds. These are offered by brokers and have MARKET RISK and a substantial amount of fees that often range from 3.5 to 5% per year. They are complicated as they combine investments and annuities together into one product with lots of rules. LISTEN TO SUZE ORMAN |
Growth vs. Income
The needs of each person can be different. This means there are options.
The needs of each person can be different. This means there are options.
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GUARANTEED INCOME
You can receive an income for life either monthly or annually. Most companies charge a fee but also offer a guaranteed roll-up benefit and Long-Term Care feature that can be triggered later in your life. Vertical Divider
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SAFE MARKET GROWTH
You can receive a market linked growth rate of return with no market risk and NO fees*. Income may be taken as needed of up to 10% per year with most carriers. *Some indexes may have an optional fee for enhanced index growth options. Vertical Divider
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RISK MARKET GROWTH
The concern of money strictly in the market is when your taking out money during retirement. Often on a down market it can be very difficult to return from the market decline called the Sequence of Returns |
Guaranteed Income Strategy
When planning for income, many clients try to take money from their investments like the market but can often find issues happen when the markets are falling or have a lot of volatility. How do we solve this? We simply use an INCOME STRATEGY which offers a Guaranteed Income, partnered with a Safe Market Growth or Risk Market Growth investment
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INCOME CHALLENGE If a client has a Million dollars, they may choose and they want 5% Partial Withdrawals, they would take $50,000 per year. But if the market is volatile, they could run into a Sequence of Returns issue INCOME STRATEGY OPTION - Invest $700,000 into a Guaranteed Income annuity and receive $50,000 for life - Invest $300,000 into either a Safe or Risk Market investment. WHAT COULD BE A POSSIBLE OUTCOME? A lifetime income of $50,000 for life and if your investment received a rate of return of 7.27% then you would double your money in 10 years to $600,000 and in another 10 years double to $1,200,000. |
WHAT IS THE RULE OF 72?
The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself. 
What rate of return you should expect?
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Fixed Index Annuity Features
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How do Fixed Index Annuities Work?
A Fixed Index Annuity will gain with the market, but not lose principle or interest during a down market.
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WHAT HAPPENS WHEN INTEREST RATES CHANGE?
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THE POWER OF ANNUAL RESET
HOW RATE LOCKS WORK (not on all products)
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ANNUITY TAXATION
Annuities are taxed as Ordinary Income. So if you have a NON-Qualified, annuity, remember this will be taxed differently then a Non-Qualified investment like a stock. It is important that you consult a tax advisor with questions you may have. |
This information on this website is for educational purposes only and not meant to be taken as advice. Please consult product illustrations and disclosures prior to making any informed decision. All results above are hypothetical in nature and may not be the results you receive.
