Deferred Annuities - Good Retirement Planning Tools
An annuity is a contract between an individual and an insurance firm,
whereby the individual pays a certain amount of money to the firm that
will be paid back with interest by the firm. Earnings on the principal
and interest of the annuities are tax-deferred until withdrawal. Deferred
annuities are considered best suited for long-term investments and ideal
for retirement plans. Annuities are guaranteed risk-free investments that
are better than stock market investments because they are secure as long
as the insurance firm you select to purchase the annuity from is financially
strong and secure. Many investors are of the opinion that annuities are
much better investment options than savings accounts or Certificates of
Deposit.
Variable And Fixed Deferred Annuities
Deferred annuities can be
fixed, variable, or equity-indexed annuities. Fixed annuities offer investors
a fixed income consisting of the principal and minimum interest over a
period of time, whereas variable annuities refers to investing in mutual
fund like bonds, where the payout amount depends on how the bond performs.
People can opt to pay a one-time single payment or installments spaced
out over a period of time. Equity-indexed annuities are a hybrid combination
of both fixed and variable annuities; you are guaranteed a fixed income
without the worry about stock market fluctuations as you are offered a
lifetime guaranteed minimum interest rate and your annuity value never
declines.
Similarly, the payout can be a one-time lump payment or smaller lump
sums paid periodically. The payout could be for your entire lifetime plus
that of another person that you name in case of a joint lifetime annuity.
One fact that has to be stated is that if you choose to withdraw funds
before you reach age 59 1/2, you are liable for a tax penalty of 10% plus
are charged a withdrawal fee. Withdrawals affect the death benefit, account
value as well as any other benefits of the annuities, so enquire and find
out the exact implications of withdrawals before implementing it.
Choose a qualified legal reserve life insurance company that can help
you utilize deferred annuities to secure your savings to be used on your
retirement. Since there are restrictions limiting your annual contributions
to annuities, make good of the opportunity and provide for your old age.
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The information listed above is true and complete to the best
of our knowledge. All recommendations are made without guarantee
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