Sunday, September 25, 2011

Exchanging an Annuity

Before making the decision to exchange your annuity, there are several things you must consider:

1. How safe is my annuity investment? For an annuity product, the safety of your money is backed by the claims-paying ability of the issuing insurance company, not any government agency. So you need to make sure that the issuing company is in sound financial health. Annuity owners will sometimes exchange to a company with greater financial stability.

2. How does the current interest rate compare to the original contract rate? Some fixed annuity products offer competitive initial rates to attract investors. However, the interest rate might only be guaranteed for a limited period of time, say one or two years. With this in mind, your current renewal could be lower than what you might otherwise get on a new annuity.

3. Is my annuity lacking some of the newer annuity benefits? In a highly competitive business, many annuity companies work to offer new insurance features, such as interest rate guarantees, bonuses, guaranteed death benefits, long-term care riders and guaranteed income payments to attract investors. Therefore, you could fine that a new annuity may better meet your needs or provide you with the opportunity for competitive returns.

Whether or not an annuity exchange makes sense depends on your existing policy and your individual financial situation. Although the thought of switching annuities might, at first, appear to be in your best interests, you should always consider the costs that will often be involved in doing this.

Contact us at Annuity Liberty for more information!

Sunday, September 18, 2011

How Options Can Affect Your Annuity Income

 The list below is based on an initial investment of $100,000 in a single straight life annuity. It shows how your income may drop as you add extra options:

Type of Annuity - Straight Life
What it's Designed to do - Provides you with income for life.
Sample Monthly Annuity Income - $650

Type of Annuity - Life plus five-year guarantee
What it's Designed to do - Provides you with income for life. Guarantees 60 payments to your estate in case you die within the first five years of your contract.
Sample Monthly Annuity Income -  $640

Type of Annuity - Life plus 10-year guarantee
What it's Designed to do - Provides you with income for life. Guarantees 120 payments to your estate in case you die within the first 10 years of your contract.
Sample Monthly Annuity Income -  $620

Type of Annuity - Life plus joint-and-last-survivor
What it's Designed to do - Provides income for life for you and your spouse. Payments stop when both of you have died.
Sample Monthly Annuity Income - $500 

Type of Annuity - Indexed Life Annuity
What it's Designed to do - Provides income for life. Payments increase with inflation to maintain your buying power.
Sample Monthly Annuity Income -  $400 to start (goes up when prices rise)

For more information, contact us at Annuity Liberty!

Type of Annuity -
What it's Designed to do -
Sample Monthly Annuity Income - 

Sunday, September 11, 2011

Fixed Immediate Annuities

It's possible to increase your monthly cash flow with a fixed immediate annuity. An immediate annuity is simple the payment of a premium to an insurance company. In exchange, the company converts your premium to a monthly cash payment for life or term of years. (Monthly payments are based on the claims-paying ability of the insurer, so picking a financially solid insurance company is important.) As each payment consists of principal and interest, each annuity payment is partially excluded from taxation as described by IRS Publication 590. Premium taxes could apply in some states.

Here's a hypothetical example. A 70-year old gentleman paid $250,000 in premium to an insurance company for a fixed, immediate annuity. In return, the insurance company makes annuity payments of $2,000 per month. Of this payment $1,300 will be considered a return on investment and only $700 will be subject to federal income taxes. Assuming this taxpayer is in a 25% federal income tax bracket, the income tax for each payment would come to $175 per month. Any payments received after the taxpayer exceeds his life expectancy are complete subject to federal income taxes. That's $24,000 each year of checks in the mail. Please note that these annuities cannot be surrendered for value and payments will usually cease at the insured's death. Please note that your actual results will vary based in part upon your age and premium paid.

For whom may a fixed annuity income be suitable?

- A retiree needing increased monthly cash flow
- A person with no heirs or who is not concerned about leaving an estate
- Someone who has set aside other funds to leave to heirs if they desire to leave an inheritance
- A retiree desiring the fixed payment and wanting to avoid maturities, rolling over investments and the maintenance and administration often required of investing on one's own.

For more information contact us at Annuity Liberty.

Sunday, September 4, 2011

Seven Things That Can Affect Your Annuity Income

Many people choose the peace of mind that an annuity offers because it gives them set monthly payments in return for their savings. Of course, you want to receive the most income you possibly can for those savings. Here are some things that can have an affect on your income:

1. Your Age: The older you are, the more money you get. That's because you are not expected to live as long.
2. Your Health: If you have health problems, you are less likely to live as long as a healthy person so you will get a higher income.
3. Your Gender: Women get less money than men of the same age because they are likely to live longer.
4. Type of Annuity: You get the highest income with a basic annuity that covers only you. Any special options you add will lower your income. That's because these options increase the costs to the insurance company. Example: You'll get less if you want to protect your income from rising prices.
5. Interest Rates: If interest rates are high when you buy your annuity, you'll get bigger payments. Some people wait to buy an annuity until they can get more for their money.
6. How Much You Have Saved: The more money you put into your annuity, the more you get back as income.
7. How Long You Want the Annuity to Last: With some annuities, you only get monthly payments until your death. With others, payments may continue to your spouse, your dependent children, or your estate after you die. The longer you want payments to carry on after your death, the less you'll get each month while you're alive.

Remember, there are ways to make your annuity do more for you. Contact us to learn more!