Thursday, February 26, 2004
Monday, February 23, 2004
Recent client question? www.legacyannuities.com
Joe
What is a "Split Annuity"?What are the benefits?
Split Annuities
Income and Capital Preservation
A Split Annuity is not an annuity policy but a combination of two annuity products. A single premium immediate annuity and a single premium tax deferred annuity. Structured in such away as to produce immediate income for a guaranteed period of time and to restore you original principal at the end of that time period.
Administration
A Single Premium Annuity is used to restore the original principal at the end of the guaranteed period. The Single Premium Immediate Annuity provides a guaranteed monthly income for the same time period.
Advantages of a Split Annuity
One advantage of a split annuity is that your original principal is restored at the end of the guaranteed period. This allows you to start the process over again at prevailing interest rates. The funds placed in the Single Premium Deferred Annuity policy are available for emergencies with limitations.
Plan Limitations
The limits place on the use of a split are annuity are the issue ages of the policies, usually age 0-85 for non qualified funds and 0-70 for qualified funds. The immediate income periods range from 3 to 20 years.
Example of a Split Annuity
$100,000
Immediate Annuity
$38,430
at 6.2% Deferred Annuity
$61,570
at 6.25%
Monthly Income
$485.37 will grow
to
Annual Income
$5,824.48 Yr. 1 $65,418
Yr. 2 $69,507
for 8 years
for which Yr. 3 $73,851
Yr. 4 $78,466
82%
is not taxed Yr. 5 $83,371
Yr. 6 $88,581
Total Income
before Taxes
$46,595.83 Yr. 7 $94,118
Yr. 8 $100,000
Original Principal
Please note that the illustration is based on a guaranteed interest rate of 6.25% for 8 years. Withdrawals from an annuity prior to age 59 1/2 may result in a 10% penalty tax imposed by the IRS. Annuities are not FDIC insured.
Thanks,
Joe
www.legacyannuities.com
Joe
What is a "Split Annuity"?What are the benefits?
Split Annuities
Income and Capital Preservation
A Split Annuity is not an annuity policy but a combination of two annuity products. A single premium immediate annuity and a single premium tax deferred annuity. Structured in such away as to produce immediate income for a guaranteed period of time and to restore you original principal at the end of that time period.
Administration
A Single Premium Annuity is used to restore the original principal at the end of the guaranteed period. The Single Premium Immediate Annuity provides a guaranteed monthly income for the same time period.
Advantages of a Split Annuity
One advantage of a split annuity is that your original principal is restored at the end of the guaranteed period. This allows you to start the process over again at prevailing interest rates. The funds placed in the Single Premium Deferred Annuity policy are available for emergencies with limitations.
Plan Limitations
The limits place on the use of a split are annuity are the issue ages of the policies, usually age 0-85 for non qualified funds and 0-70 for qualified funds. The immediate income periods range from 3 to 20 years.
Example of a Split Annuity
$100,000
Immediate Annuity
$38,430
at 6.2% Deferred Annuity
$61,570
at 6.25%
Monthly Income
$485.37 will grow
to
Annual Income
$5,824.48 Yr. 1 $65,418
Yr. 2 $69,507
for 8 years
for which Yr. 3 $73,851
Yr. 4 $78,466
82%
is not taxed Yr. 5 $83,371
Yr. 6 $88,581
Total Income
before Taxes
$46,595.83 Yr. 7 $94,118
Yr. 8 $100,000
Original Principal
Please note that the illustration is based on a guaranteed interest rate of 6.25% for 8 years. Withdrawals from an annuity prior to age 59 1/2 may result in a 10% penalty tax imposed by the IRS. Annuities are not FDIC insured.
Thanks,
Joe
www.legacyannuities.com
Client question? www.legacyannuities.com
I don't understand the different terminology of annuities?
Please find a glossary.Please call or email if I can answer any questions.
Thanks,
Joe
Glossary of Terms
Cap
The Maximum interest rate that can be credited to your equity index annuity policy in a policy year or over the term of the policy.
Base Interest Rate
The Base Rate is the Current Rate less the Bonus Rate if any. In many cases the Base Rate and the Current Rate are the same.
Bonus Rate
A Bonus Rate is the "extra" or "additional" interest paid during the first year. (the initial guarantee period) The term "Bonus Rate" also means that extra interest paid as a pure bonus with no vesting requirements to earn it... a true bonus.
Compounding of Gains
Interest that is creditied to your policy is added to your principal as well as interest credited in prior policy years. Some companies do not compound the gains credited to equity index policies from prior years. This dramaticaly reduces the overall rate of return earned by your money.
Current Interest Rate
This is the interest rate that an annuity is paying it is the sum of the base rate, if any and the bonus rate, if any. The current rate is set by the insurance company at the time of issue and is guaranteed for specific length of time.
Floor
The minium interest rate that can be credited to your policy equity index annuity in a year or over the term of your contract.
Old Money Rates or Renewal Rates
The Old Mony Rate is that rate declared by the company after the inital rate guarantee.
After the initial interest rate guarantee the company decides what the interest rate will be for the following policy year. This rate is based on the company's original investment portfolio and how the company designed the product.
For example if the annuity policy at the time of issue paid a "current rate" of 7.50% which was guaranteed for one year and had a "base rate" of 6.50%, the company could declare a new interest rate for the second policy year of 6.0%. Each policy year thereafter the company would declare a new interest rate for that policy year.
Participation Index Rate
The amount of the percentage change (which is set by the company) used to determine the amount to be credited to your policy for that year. If the Participation Index Rate was 90% and the percentage change of the S&P 500 Index was 10%. Then the 10% change would be multiplied by the Participation Index Rate of 90% resulting in an Interest Rate of 9.0% being credited to your policy for that term.
Percentage Change
The change in the S&P 500 Index from the beginning of the term to the end of the term expressed as a percentage. The term could be one policy year, 5 policy years or 7 policy years etc. If the S&P 500 was 500 at the beginning of the policy year and closed at 550 at the end of the policy year, there would have been a 10% increase in the S&P 500 Index. In years where the S&P 500 Index is negative the percentage credited to your policy is (0). In this case there would be no change in your policy value.
Premium Bonus
Additional money that is credited to the accumulation account of an annuity policy under certain conditions. First, the amount of money credited to the policy is calculated as a percentage of your initial premium. Secondly, the money credited to you accumulation account "vests" in your policy after a certain number of years.
For example; if your initial premium is $10,000 and the policy pays a 4.0% premium bonus and vest in years 6 through 9, your policy is credited with $400.00. The $400.00 earns interest as if it were your original premium, however if you surrender your policy, during the first 5 years you DO NOT receive the Premium Bonus and the interest it earns. During year 6, 7, 8 and 9 you "vest in to" 25% of the Premium Bonus and it's earned interest each year.
Rollover
The transferring of funds accumulated within an employer sponsor retirement plan to another employer sponsored retirement plan or IRA.
Section 1035(a) Exchange
The tax-free exchange of one nonqualified annuity contract or life insurance policy for another with a different company. For example the transfer of a life to life; life to annuity; annuity to annuity policy. Partial transfers are also permited.
Serial Issue
A number of annuity contracts, issued by the same company within a twelve month period to the same owner.
Settlement Options
The methods by which the insurer may pay annuity or life insurance policy proceeds to the annuitant, contract owner, policy owner or beneficiary.
Transfer
The direct transfer of funds from one financial institution to another financial institution for the benefit on an individual. For example; the transfer of IRA funds from a bank to an insurance company. The check issued to the insurance company is for "the benefit of James Jones". The direct transfer avoids the 20% withholding since the check is issued an institution "for the benefit of James Jones" and is not paid directly to James Jones.
wwww.legacyannuities.com
PH# 1-800-810-4525
I don't understand the different terminology of annuities?
Please find a glossary.Please call or email if I can answer any questions.
Thanks,
Joe
Glossary of Terms
Cap
The Maximum interest rate that can be credited to your equity index annuity policy in a policy year or over the term of the policy.
Base Interest Rate
The Base Rate is the Current Rate less the Bonus Rate if any. In many cases the Base Rate and the Current Rate are the same.
Bonus Rate
A Bonus Rate is the "extra" or "additional" interest paid during the first year. (the initial guarantee period) The term "Bonus Rate" also means that extra interest paid as a pure bonus with no vesting requirements to earn it... a true bonus.
Compounding of Gains
Interest that is creditied to your policy is added to your principal as well as interest credited in prior policy years. Some companies do not compound the gains credited to equity index policies from prior years. This dramaticaly reduces the overall rate of return earned by your money.
Current Interest Rate
This is the interest rate that an annuity is paying it is the sum of the base rate, if any and the bonus rate, if any. The current rate is set by the insurance company at the time of issue and is guaranteed for specific length of time.
Floor
The minium interest rate that can be credited to your policy equity index annuity in a year or over the term of your contract.
Old Money Rates or Renewal Rates
The Old Mony Rate is that rate declared by the company after the inital rate guarantee.
After the initial interest rate guarantee the company decides what the interest rate will be for the following policy year. This rate is based on the company's original investment portfolio and how the company designed the product.
For example if the annuity policy at the time of issue paid a "current rate" of 7.50% which was guaranteed for one year and had a "base rate" of 6.50%, the company could declare a new interest rate for the second policy year of 6.0%. Each policy year thereafter the company would declare a new interest rate for that policy year.
Participation Index Rate
The amount of the percentage change (which is set by the company) used to determine the amount to be credited to your policy for that year. If the Participation Index Rate was 90% and the percentage change of the S&P 500 Index was 10%. Then the 10% change would be multiplied by the Participation Index Rate of 90% resulting in an Interest Rate of 9.0% being credited to your policy for that term.
Percentage Change
The change in the S&P 500 Index from the beginning of the term to the end of the term expressed as a percentage. The term could be one policy year, 5 policy years or 7 policy years etc. If the S&P 500 was 500 at the beginning of the policy year and closed at 550 at the end of the policy year, there would have been a 10% increase in the S&P 500 Index. In years where the S&P 500 Index is negative the percentage credited to your policy is (0). In this case there would be no change in your policy value.
Premium Bonus
Additional money that is credited to the accumulation account of an annuity policy under certain conditions. First, the amount of money credited to the policy is calculated as a percentage of your initial premium. Secondly, the money credited to you accumulation account "vests" in your policy after a certain number of years.
For example; if your initial premium is $10,000 and the policy pays a 4.0% premium bonus and vest in years 6 through 9, your policy is credited with $400.00. The $400.00 earns interest as if it were your original premium, however if you surrender your policy, during the first 5 years you DO NOT receive the Premium Bonus and the interest it earns. During year 6, 7, 8 and 9 you "vest in to" 25% of the Premium Bonus and it's earned interest each year.
Rollover
The transferring of funds accumulated within an employer sponsor retirement plan to another employer sponsored retirement plan or IRA.
Section 1035(a) Exchange
The tax-free exchange of one nonqualified annuity contract or life insurance policy for another with a different company. For example the transfer of a life to life; life to annuity; annuity to annuity policy. Partial transfers are also permited.
Serial Issue
A number of annuity contracts, issued by the same company within a twelve month period to the same owner.
Settlement Options
The methods by which the insurer may pay annuity or life insurance policy proceeds to the annuitant, contract owner, policy owner or beneficiary.
Transfer
The direct transfer of funds from one financial institution to another financial institution for the benefit on an individual. For example; the transfer of IRA funds from a bank to an insurance company. The check issued to the insurance company is for "the benefit of James Jones". The direct transfer avoids the 20% withholding since the check is issued an institution "for the benefit of James Jones" and is not paid directly to James Jones.
wwww.legacyannuities.com
PH# 1-800-810-4525
Thursday, February 19, 2004
Recent client question. www.legacyannuities.com
I have seen Insurance Companies advertise bonus rates.How do they work?
A Bonus Rate is the "extra" or "additional" interest paid during the first year. (the initial guarantee period) The term "Bonus Rate" also means that extra interest paid as a pure bonus with no vesting requirements to earn it... a true bonus. Bonus rates are fine but always look at the "Yield to surrender" when comparing different annuity options.
Thanks,
Joe
www.legacyannuities.com
I have seen Insurance Companies advertise bonus rates.How do they work?
A Bonus Rate is the "extra" or "additional" interest paid during the first year. (the initial guarantee period) The term "Bonus Rate" also means that extra interest paid as a pure bonus with no vesting requirements to earn it... a true bonus. Bonus rates are fine but always look at the "Yield to surrender" when comparing different annuity options.
Thanks,
Joe
www.legacyannuities.com
Recent client question? www.legacyannuities.com
How is an annuity taxed?
Think of an annuity as an umbrella. When money is placed under the umbrella or annuity contract, it is treated differently as far as taxes go.The money that you put in an annuity is referred to as a premium, it's your original contribution or principal contribution. Since you already have paid taxes on it, it never again will be subject to taxation. This assumes that you haven't purchased an annuity as part of a qualified retirement program such as an IRA, 401(k), TSA or 457 plan.
The money that you put into an annuity will earn interest or receive dividend income or capital gain distributions. These "earnings", unlike money in a savings account, mutual fund, certificate of deposit are not taxed in the year in which they are earned. Thus the "earnings" will continue to grow and compound tax free until withdrawn.
The IRS eventually collects taxes on the "earnings" of your annuity.
When you withdraw money from your annuity the earnings, according to the IRS, are withdrawn first. The "earnings" are subject to "ordinary income taxes" in they year in which they are withdrawn. Keep in mind that capital gain distributions in a mutual fund are taxed at capital gains rates.
The IRS also has what it calls a "Premature Distributions". If you withdraw your earnings and your under the age of 59 1/2. Not only are your earnings tax at ordinary income tax rates, the IRS makes you pay a penalty of an additional 10% on the earnings that are taxed.
Thanks,
Joe
www.legacyannuities.com
How is an annuity taxed?
Think of an annuity as an umbrella. When money is placed under the umbrella or annuity contract, it is treated differently as far as taxes go.The money that you put in an annuity is referred to as a premium, it's your original contribution or principal contribution. Since you already have paid taxes on it, it never again will be subject to taxation. This assumes that you haven't purchased an annuity as part of a qualified retirement program such as an IRA, 401(k), TSA or 457 plan.
The money that you put into an annuity will earn interest or receive dividend income or capital gain distributions. These "earnings", unlike money in a savings account, mutual fund, certificate of deposit are not taxed in the year in which they are earned. Thus the "earnings" will continue to grow and compound tax free until withdrawn.
The IRS eventually collects taxes on the "earnings" of your annuity.
When you withdraw money from your annuity the earnings, according to the IRS, are withdrawn first. The "earnings" are subject to "ordinary income taxes" in they year in which they are withdrawn. Keep in mind that capital gain distributions in a mutual fund are taxed at capital gains rates.
The IRS also has what it calls a "Premature Distributions". If you withdraw your earnings and your under the age of 59 1/2. Not only are your earnings tax at ordinary income tax rates, the IRS makes you pay a penalty of an additional 10% on the earnings that are taxed.
Thanks,
Joe
www.legacyannuities.com
Monday, February 16, 2004
Recent client question?
What is an Immediate Annuity?
An Immediate Annuity is an annuity policy that is issued for a single lump sum premium that will give you and/or or your spouse a guaranteed fixed payment. These payments may be monthly, quarterly or annually and based on one's life's expectancy or that of you and your spouse.
Joe
www.legacyannuities.com
What is an Immediate Annuity?
An Immediate Annuity is an annuity policy that is issued for a single lump sum premium that will give you and/or or your spouse a guaranteed fixed payment. These payments may be monthly, quarterly or annually and based on one's life's expectancy or that of you and your spouse.
Joe
www.legacyannuities.com
Sunday, February 15, 2004
Recent Client Question:
Is ING a good stable company?
Yes ING is a good stable company.There AM best rating is A+
Secure / Superior ,S&P rating AA+ Very Strong. ING is a International
finacial conglomerate and offer very competive annuity rates.As always
diversification is the key to succesful investing.
Joe
www.legacyannuities.com
Is ING a good stable company?
Yes ING is a good stable company.There AM best rating is A+
Secure / Superior ,S&P rating AA+ Very Strong. ING is a International
finacial conglomerate and offer very competive annuity rates.As always
diversification is the key to succesful investing.
Joe
www.legacyannuities.com
Recent Client Question:
What are the advantages of investing in a cd-type annuity vs. a bank CD?
The are 3 main advantages of annuity investing.#1)Higher interest rates than bank CDs.#2)Tax deffered growth.#3)Annuities avoid probate.As always diversification is the key to successful investing.
Joe
www.legacyannuities.com
What are the advantages of investing in a cd-type annuity vs. a bank CD?
The are 3 main advantages of annuity investing.#1)Higher interest rates than bank CDs.#2)Tax deffered growth.#3)Annuities avoid probate.As always diversification is the key to successful investing.
Joe
www.legacyannuities.com
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