More About Annuities

Safety

This is one of the main concerns of potential annuity buyers and is especially true with retirees.
Anyone lost any money in the market?  In fact, surveys of retirees who were asked, “Why did you buy an annuity” the number one answer is SAFETY!
Many people consider their bank to be the place to keep their “Safe Money.”  It’s ironic though, that most of the people we have asked…

1. The size (assets) of their bank – they don’t know!
2. The S&P rating of their bank – they don’t know!

 Here’s some comforting information about how safe your money is with an annuity company…
There is a Double Level of Security with an annuity!

1. The Assets and Ratings of the Company
2. Legal Reserve System

 Remember, not one penny of annuity premium has ever been lost due to an insurance company failure…even during the depression.  The concept of insurance and the safety of insurance companies have been accepted for a long time.  In fact, we depend on that safety every day by protecting ourselves from financial loss by insuring our home, car, life and health.  In every way that we could suffer a financial loss, we protect ourselves by turning to an insurance company.  You shouldn’t feel less safe because we’re talking about money instead of physical things.  Looking at the safety of our money in that light should make us feel better about using insurance companies to hold our money and pay us tax deferred interest at the same time.

Potentially Avoids Probate
Another benefit of fixed annuities is that they may bypass probate at death if structured properly and avoid:
Expenses – Attorneys and courts can eat up from 5-15% of the estate
Time – Average delay 1-2 years – Marilyn Monroe (26 years)
Confidentiality – Probate is public information
Strong Guarantees
The only answer to outliving your income is to have Fixed Annuities as part of your investment portfolio.
Why?  It is one of the only financial vehicles that can Guarantee Income For Life

1. Not your bank CD
2. Not your mutual fund
3. Not your real estate

And unlike money invested in stocks and bonds, fixed annuities provide a Guarantee of Principal and a Minimum Interest Rate Guarantee.  You can never lose your premium in a fixed annuity if you don't take excess withdrawals!
Click here to read: Humberto Cruz: Annuity can pay off for your heirs  published on June 30, 2008. He writes about the guarantee of lifetime income through an annuity and the additional ability to pass on an inheritance to your family.

Tax–Deferred Growth
In any given year, the average American will work until May 12th to pay federal, state and local taxes.  There is no federal or state income tax on the growth inside an annuity!
Funds grow much quicker in a tax-deferred vehicle.  Examples:
If you invested one cent at 5% interest in 1492, the year “Columbus sailed the ocean blue”, how rich would you be today? $610 million!
What if you had been in the 33% tax bracket - $192,320!
Another example…
 If a dollar doubled every year for 20 years - $1,048,576
If subject to a 28% tax bracket - $ 51,353!

Protection From Creditors
Most states have enacted laws that protect funds in an annuity from creditors.
Attorneys love CD’s, mutual funds, and stocks - they hate annuities!
Examples:

1. Sam Snead (auto accident almost wiped out his lifetime savings)
2. Babe Ruth (placed money in annuities during the depression)
3. OJ Simpson (currently living off NFL annuities)
4. Ken Lay (Read article on $4.7 million of fixed annuities he bought)

 Social Security Benefit Taxation (SSBT)
By transferring taxable interest accounts such as…

1. CD’s
2. Money Market
3. Stock – Dividends
4. Mutual Fund – Dividends
5. Municipal Bonds
6. US Treasuries

into Deferred Annuities, it might reduce enough annually reportable income so the threshold is below the limit.
Single: income $25K - $34K          SSBT = 50% of excess above $25K
Single: income $34K or more         SSBT = 85% of excess above $32K
Married: income $32K - $44K        SSBT = 50% of excess above $32K
Married: income $44K or more      SSBT = 85% of excess above $44K

The inside build-up in an annuity contract does not count as provisional income until withdrawn for Social Security Taxation and is the only investment vehicle to do so.

No Sales or Administration Charges
Fixed annuities don’t have fees.  The way a fixed annuity credits interest may best be compared with the way a bank credits CD interest.  100% of your deposit is credited and starts earning interest the day it is received by the insurance company.

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