Powered by Max Banner Ads 

Annuities Have S.T.Y.L.E.

 Powered by Max Banner Ads 

Money and luck

Money and luck

Annuities have been around a long time-in fact, since the days when Rome ruled an empire. Roman contracts known as “annua” promised a stream of payments for a fixed period of time, or for life, in return for a single premium payment.

This type of “payout” annuity has not changed conceptually up to the present day.

If you enjoy the novels of Charles Dickens or Jane Austen, you’ve probably come across many references to annuities. They were the favored investment vehicle of the upper classes in 18th- century Europe and were known as a reliable way to generate income for the life of the beneficiary.

Annuity growth in the United States was spurred by the Great Depression, as investors sought a stable investment offered by reputable insurance companies of long standing.

An annuity is a contract issued by an insurance company. It is a unique financial product that provides tax deferral of interest and capital gains and the option (if funds are annuitized) of a guaranteed monthly income for life.

The typical consumer wants decent growth potential with a reasonable assurance of safety, all in one simple package. And no existing product does that better than annuities.  Annuities are a safe place to put your money that will provide you with a decent growth potential, protection from loss, a steady cash flow, and the flexibility to move your money when circumstances change.


Annuities are a popular, tax-deferred investment vehicle for those in or near retirement (typically ages 50 to 85) who are looking for:

  • A way to save and accumulate money for future needs
  • Flexible income benefit options – helping hedge the risk of living too long and outliving your income
  • Protection against living too long and outliving assets
  • Tax-deferred growth opportunities
  • Guaranteed death benefits

Annuities Have S.T.Y.L.E.

Mnemonic devices are used everyday, to remember the names of the presidents, the date of some important historical event, and, now, we can also use them to remind us of the the advantages annuities have to offer. Annuities have S.T.Y.L.E.

S is for Safety

… which annuities offer in spades. All fixed annuities have guaranteed rates, making sure that no matter what happens in the market, your money is safe. If participating in the gains of the stock market is attractive to you, however, equity-indexed annuities offer the potential to participate in the gains, yet still be protected against the losses of the stock market – your premium stays safe, you continue to earn a minimum guaranteed rate, but market performance guides your potential gains.

Because life insurance companies offer annuities, state law and the financial strength of the insurance industry protect your money. The insurance companies that issue them are legal reserve companies, and as such are required by law to maintain substantial reserve funds to meet all their contractual obligations.

These companies are also continually scrutinized by third-party companies and rated for safety by trusted names like Standard & Poor’s, Moody’s, and the industry’s leading rating service, A.M. Best, so you can quickly assay the historical stability of a particular company to enhance your peace-of-mind. In many states, annuities often enjoy enhanced protection from creditors, as well.

T is for Tax Deferral

… which goes hand in hand with compound interest. With tax deferral, you don’t pay taxes on your earned interest until you use the money. This lets your savings grow in three ways: the interest you earn on your premium, the interest you earn on your accumulated interest, and the interest you earn on the money you didn’t lose to taxes.

You may pay taxes on your earned interest eventually, but you’ll have built up a substantially larger nest egg in the meantime. Tax deferral puts you in control, letting you choose when to pay those taxes, which is important because it’s not just what you earn, it’s what you keep that counts!

Y is for Yield

… an arena where annuities consistently outperform CDs and many other taxable savings plans. Annuities are offered at competitive, market-based interest rates, and historically, have offered a 1-2% advantage over CD rates. Demonstrably higher yields combined with the benefits of tax deferral make annuities a best bet for maximizing your accumulation of retirement savings.

L is for Liquidity

… another area where annuities shine because annuities give you access to your money in ways other savings plans don’t. Most annuities have withdrawal provisions that provide you with penalty-free access to some of the value in your savings.

Most annuities can also be annuitized penalty-free at any time (in other words, converted into a series of payments). Most annuities also offer living benefits which can give you access to all or part of your money should you become confined to a nursing home, diagnosed with a terminal illness, or unemployed.

E is for Estate Planning Advantages

… where annuities allow for immediate transfer of benefits to your designated beneficiaries. Annuities aren’t subject to the cost, hassle, delay, and lack of privacy of the probate process. Also, income taxes on the gains in your annuity are paid by your beneficiary, not by your estate (unless you have no designated beneficiary, in which case your estate is the beneficiary).

Annuities also, if set up properly, allow you a great deal of flexibility in the naming of beneficiaries. You can name your spouse, your children, a trust, or a charity as your beneficiary (and these are just example; the list of possible beneficiaries is longer), and any benefit is then taxed according to the tax rate of the beneficiary.

Your beneficiaries get their money immediately, and without legal fees or public scrutiny. What’s more, you can name primary and secondary beneficiaries, so if for any reason your beneficiary is no longer in a position to receive funds, the benefits can be immediately transferred to a second named beneficiary, and you can change your designated beneficiary at any time.

No other savings plan offers all these advantages, and we’ve only just scratched the surface of these topics here. Just keep in mind that annuities have S.T.Y.L.E.

Tags: , , , , ,

Tuesday, July 14th, 2009 Wealth Management Comments Off on Annuities Have S.T.Y.L.E.

 Powered by Max Banner Ads 

Receive "Five Wishes"

Fill out the form below to receive your free subscription to Annuity News and our gift to you "Five Wishes"

Five Wishes is a legally-valid tool you can use to ensure your wishes and those of your loved ones will be respected even if you can't speak for yourself. Five Wishes helps you express how you want to be treated if you are seriously ill and unable to speak for yourself. It deals with all of a person's needs: medical, personal, emotional and spiritual. Let your family and doctors know your Five Wishes!

Our strict privacy policy keeps your email address 100% safe & secure.

Five Wishes is changing the way America talks about and plans for care at the end of life. More than 12 million copies of Five Wishes are in circulation across the nation, distributed by more than 15,000 organizations. Five Wishes meets the legal requirements in 40 states and is useful in all 50. Five Wishes has become America’s most popular living will because it is written in everyday language and helps start and structure important conversations about care in times of serious illness.