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 - 

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.

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!

Things To Consider...

There are many factors that should be considered before investing in an annuity. Some of these include:

1. Surrender Fees: Like fixed deferred annuities, equity-indexed annuities have penalties for early withdrawal called surrender charges. These charges can result in a loss of your principal investment. These charges typically decline over the length of the surrender charge period (typically five to 15 years depending on the company)

2. Tax Consequences: These annuities are also suited for investors with long-term investment horizons. Withdrawals from these annuities can also subject the annuity owner to income taxes, and prior to age 59 1/2, an additional 10% income tax penalty on the distributed amount.

3. Features Vary Among Insurance Companies: There are many companies that are offering these types of annuities, and the methods of calculating the minimum and maximum interest rate vary greatly among them. Although many companies offer a minimum interest rate (typically ranging between 1/5 to 3%), some companies offer minimum interest rates as low oas 0%.

4. Fees and Expenses: Asset management fees will be incurred on these annuities. Maintenance feels, sales commissions, trading costs and other contract charges could also apply. These charges will, in many cases reduce the account value of these annuities.

5. Loans and Early Withdrawals: Although some companies do allow you to ake minimal withdrawals with surrender charges, it is important to remember that some withdrawals can affect the amount of market downside protection provided under the contract.

6. Company Stability and Regulatory Oversight: All annuity features are guaranteed by the claims-paying ability of the issuing company. The guaranteed account value of an equity-index annuity applies only if the annuity is held until the end of the contract term, and that loss of principal is possible if the annuity is surrendered before the end of the contract. Despite the market participation feature, the various state insurance departments regulate these products.

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What Choices do I Have When I Buy an Annuity?

Many people who buy life annuities add one or more of these three options:

1. Joint-and-last-survivor option
   This option appeals to couples. Payments continue as long as either you or your partner lives. Sometimes you can get higher monthly payments while both partners are alive. After one dies, the payments to the surviving partner go down. The thinking is that one person will need less income than two.
2. Guaranteed benefit
   This option guarantees a certain number of payments. For instance, let’s say you choose a 10-year guarantee. What happens if you die before the 10 years are up? Your loved ones or your estate will get the rest of your payments, or they may receive a lump sum of equal value. Of course, if you live past the guarantee period, you will still receive payments for life.
3. Indexed annuity
   This option means your income goes up as prices rise. This is important because after five, 10, or 15 years, your monthly income will buy a lot less than it does today.
4. Choosing the right annuity:
5. Remember: There are lots of options for annuities today.

They may lower the size of your monthly payment, but they may make an annuity work better for you overall. For more information, contact us at Annuity Liberty!

What is a Charitable Remainder Annuity Trust?

Charitable Remainder Annuity Trust or CRAT


Definition

A charitable remainder annuity trust, or CRAT, is a trust with both charitable and noncharitable beneficiaries. Every year for the term of the CRAT, the noncharitable beneficiary receives a payment (the annuity amount) from the trust property. At the end of the trust term, the remaining property passes to the charity. For this reason, the charity's interest is described as a remainder interest.


Prerequisites

• A desire to donate to charity
• A substantial asset to donate to charity


Key Strengths

• Provides income tax deduction
• Provides an income tax haven for assets that have appreciated substantially
• Pays out fixed income every year
• Exists with fairly simple administration
• Reduces potential federal estate tax liability


Key Tradeoffs

• Requires an irrevocable commitment
• Requires the annuity to be paid each year, regardless of whether there is sufficient trust income available
• Inflation may cause CRAT to lose some of its value
• Prohibits the additional contribution of assets


Variations from State to State

• Community property states may affect any gift tax due


How Is It Implemented?

• Consult a legal professional to draft the CRAT
• Select a noncharitable beneficiary, a charitable beneficiary, and a trustee
• Select the assets you want to use to fund the CRAT
• Set the term of the CRAT and establish the annual payment amount

For more information, contact us at Annuity Liberty.

More About our Company

Annuity Liberty is not your ordinary type of insurance agency, we can make a positive difference in your financial future. Since 1996, we have helped thousands of individuals and families achieve their goals, so, they could rest easy. Our competitively priced annuity products give you options to reach your financial goals depending on your needs. You can select from products designed to help you retain wealth, add to your retirement or other savings, supplement your income, and plan for final expenses.

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