Annuity
Annuities are products that are in great demand for helping Americans negate outliving their money. The earlier one enrolls in an annuity plan the greater the monthly benefit.
The annuity is an insurance product and needs to be purchased from a highly rated insurance carrier. They produce tax deferred long term growth and people like the long term financial benefit with asset preservation and security both included. The financial advisor will suggest putting a portion of assets into this type of product since it is the only one that will guarantee lifetime income. The annuity contract allows an option of paying in a lump sum amount or contributing over a period of time. When selecting a broker, the customer should ask specific questions including, feelings of risk tolerance, the plan of how to use the annuity, and current age. Also what is the current financial situation such as tax status, current assets, and tax bracket, along with income and debts, and funds available to purchase the annuity?
Types of Annuties
Immediate Annuity – Starts within a year and can last until death. Also supplements other income like Social Security, which helps with ongoing expenses, and is a reliable income stream.
Fixed Index Annuity – Provides money growth and may allow earning higher interest based on an index. One cannot lose money since there is no investment in the stock market. Earnings are tax deferred also. There are several options for retirement income, including lifetime, and provides the family with a death benefit.
Deferred Income Annuity – At a future date there will be a steady, reliable, income stream that can last as long as the annuitant lives. There are numerous options for how long this income lasts, including lifetime.
Variable Annuity – Money is invested in a broad range of stock market options with growth potential. Income is tax deferred, so money grows faster, and there are also several options for payout, including lifetime. A death benefit is also included.
Methods of Payout
Annuitize- Begin with completing a form with payment options available. Once the best option is chosen, in most cases it cannot be changed and no more money can be taken out. If the Life Income option is chosen and death occurs there may not be any further payments, however, this is the highest payout option. Check with a tax advisor for any tax consequences.
Full Withdrawal – The annuitant receives a lump sum payment withdrawal and the annuity ends. Check with a tax advisor for any tax consequences.
Partial Withdrawal – Deferred annuities allow one to take 10 % annually with no surrender charges.
Living Benefits – Other than the Life Only option, when death occurs payments for any remaining account value may be left to the surviving beneficiaries.