Services

Annuity

An annuity is a financial tool that is used to build or protect a retirement fund. 
Congress enacted legislation a number of years ago that allows individuals to 
invest money through an annuity without paying taxes on the earnings. The 
annuity regulations creates two advantages:

1) Income taxes are due when the dollars are withdrawn.

2) Your money is compounded.  Your “earnings” earn dollars.

These are the basic concepts of an annuity. The next step is to learn about the
types of annuities.

Fixed Annuity - A fixed annuity earns a specific interest rate over a specific time 
period (term).

Fixed annuities may have a “set” interest rate for the term of the annuity. Others 
will have the interest rate “reset” on the anniversary date. This lets the annuity 
owner take advantage of rising interest rates.

Index Annuity - An index annuity increases its value when a stock market index 
rises and falls. Most index annuities use the S&P 500. Although using an 
index sounds risky, they are not. An index annuity can increase in value but 
CANNOT decrease  in value. That is you can NOT lose money. You get the 
benefit of stock market fluctuations with no possibility of loss. Also, some 
index annuities allow you to move your funds in and out of interest rate 
accounts.

Variable Annuity - This type of annuity invests your hard earned dollars in 
equities. That is stocks. You are subject to the rise and fall of the markets. You 
could lose “it all."  Robert advises against this type of annuity.

Let's continue our annuity education by reviewing some terminology:

Term - The length of an annuity contract. Generally the term is in years.

Guaranteed Rate - The minimum interest paid.

Guaranteed Period - The amount of time the interest is paid.

Surrender Charge - A fee assessed by the insurance company for withdrawing 
funds before the end of the annuity term. Most annuity contracts allow the 
annuity owner (you) to withdraw up to 10% annually without penalty.

Annuitization - Transforming your annuity into a retirement fund with scheduled 
payments.

Annuitization Period - The amount of time needed before a payments can begin.

Death Benefit - Monies paid to the beneficiaries if the annuity owner dies. The 
amount includes funds deposited plus all interest earned.

Terminal Illness - Some annuities allow the annuity owner to withdraw all funds 
if a terminal illness occurs.

Nursing Home - Some annuities allow withdrawal of all funds if the annuity 
owner is placed in a skilled nursing home.

 

One company developed an annuity that has long-term care coverage. The policy value is
doubled for LTC coverage (A $100,000 annuity provides $200,00 LTC coverage).

There are many types of annuities to consider. Robert prefers to talk with you so we 
can determine your needs and wants. Remember it is YOUR decision. Contact Robert at
913-962-4392 or rbell@tbals.com