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Annuity (financial contracts)

From Wikipedia, the free encyclopedia

Annuity contracts are financial products, typically offered by financial institutions, that may accumulate value and take a current value and pay it out over a period of years. These contracts are regulated by various jurisdictions and this has led to the term being focused on different features in different parts of the world.

In the US, an "annuity" generally refers to a deferred investment contract that, upon "annuitization," will make regular payments (e.g., on a monthly or annual basis) to a person (called the "annuitant") for a period certain, over one or more specified individuals' lifetimes, or over a combination of life and a period certain. (See life annuity.) Such contracts provide an income during retirement or a stream of payments as a settlement of a personal injury lawsuit (i.e., a structured settlement). Some annuities (called "joint life" or "joint and survivor" annuities) continue paying a second person (i.e., the "beneficiary") after the annuitant dies, until that person dies as well. (For example, an annuity may be structured to make payments to a married couple, such payments ceasing on the death the spouse second to die.) Annuities that make payments in fixed amounts or in amounts that increase by a fixed percentage are called fixed annuities. Variable annuities, by contrast, pay amounts that vary according to the investment performance of a specified set of investments, typically bond and equity mutual funds. Variable annuities are used for many different objectives. One common objective is deferral of the recognition of taxable gains. Money deposited in a variable annuity grows on a tax-deferred basis, so that taxes on investment gains are not due until a withdrawal is made. Variable annuities offer a variety of funds ("subaccounts" in the parlance of the industry) from various money managers. This gives investors the ability to move between subaccounts without incurring additional fees or sales charges.
An annuity is an insurance product; annuities are typically issued by the same companies that issue life insurance policies, and the risks undertaken by the issuer are fundamentally the same for both products -- that is, the insurance company bets on the life expectancy of the customer. The result is to transfer the effects of the uncertainty of an individual's lifespan from the individual to the insurer, which reduces its own uncertainty by pooling many clients.
With a "single premium" or "immediate" annuity, the annuitant pays for the annuity with a single lump sum. The annuity starts making regular payments to the annuitant within a year. A common use of a single premium annuity is as a destination for roll-over retirement savings upon retirement. In such a case, a retiree withdraws all of the money she has saved in, for example, a 401(k) (i.e., tax-advantaged) savings vehicle during her working life and uses the money to buy an annuity whose payments will replace her wage payments for the rest of her life. The advantage of such an annuity is that the annuitant has a guaranteed income for life, whereas if she were instead to withdraw money regularly from the retirement account, she might run out of money before she dies or not have as much to spend while she is alive.
Another kind of annuity is a combination of retirement savings and retirement payment plan: the annuitant makes regular contributions to the annuity until a certain date and then receives regular payments from the annuity until he dies. Sometimes there is a life insurance component added so that if the annuitant dies before annuity payments begin, a beneficiary gets either a lump sum or annuity payments.

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Can Your Annuity Do This?
by: Tony Bahu


Many people buy annuities according to their agent's recommendations. However, many people do not even know what they own. It is a good idea to take inventory of your investments, and particularly your annuity. It is important to understand what your annuity can and cannot do and what features it has. Here are some of the things you definitely must be sure to know about your annuity:
1. What interest rates are you currently getting?
2. Are the interest rates getting worse?
3. What is the rating of your insurance company? (Critical)
4. What are your surrender charges?
5. Is your principal ever at risk?
6. What retirement & income options does your annuity have?
7. Is your annuity Medicaid Friendly?
8. Did you properly designate your beneficiary annuitant and even ownership of your annuity?9. How safe is your annuity?
10. Is your annuity subject to double taxation?
12. What is your minimum guarantee?
13. Are you eligible for a 1035 exchange?
14. What happens in the event of your death? Are your beneficiaries entitled to all of the money or are there penalties?
This is a good beginning inventory list. These questions are important in assuring you are doing what is right for you. As we said before, the best annuity is the one that is best for YOU. And by taking inventory of what you own, you can now assess it against your own goals and make sure there is a match. By the way, this is a good process to go through periodically. As you know, your needs change over time. And as they change, you must make sure your investments are always in line with your goals. If they are, great. If they aren't, well, change your goals---or change your investments! But make sure there is a match.
Hopefully this helps. And remember, it's not what you know; it's what you do with what you know. If this makes sense, then pull your annuities out and take inventory. There is no better time than the present.
Ignorance is not bliss...
About The Author
Tony Bahu is the author of the controversial document, 'Annuities: The Shocking Truths Revealed', which reveals the secrets that the banks and insurance companies don't want you to know. For more information on his document, visit www.annuitymd.com.

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Highest Guaranteed Rates for the Term - Friday March 23, 2007
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4.70%

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Palladium MYG Annuity 8 (100k)
8 Yr.
4.80%

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7 Yr.
4.76%

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6 Yr.
5.14%

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5 Yr.
5.01%
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4 Yr.
4.45%

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4.35%

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4.25%
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How to Increase Your Spendable Income if You Own a CD.
by Robert D. Cavanaugh, CLU


There are several ways to squeeze more income out of a given amount of capital invested in a CD. Let me share with you the split annuity concept.
Here is an example typical of many people. Mary is 75. She is a conservative investor. She has to be because she has a limited amount of capital. On the one hand, she has to play it safe; on the other hand she needs to get as much income out of her assets as she can.
She has a $100,000 5 year CD down at the bank. It is paying 4.87% interest a year. Given her objectives of earning the most she can, not taking any risk of losing the principal and her concern for the fact that prices at the grocery store keep going up, she has at least two problems.
The first is the fact that the interest on her CD is taxable. In her 15% bracket, 4.87% nets out to 4.14%. Second, her $100,000 is not growing, so her income is not keeping up with the increases in the cost of living.
Can Mary do better?
Most likely she can. She can increase her after tax spendable income without risking her principal pretty easily. She might even be able to increase her $100,000 over time to boot. One of the ways is by using a split annuity.
The concept behind a split annuity is simple. Mary transfers her CD to an insurance company's split annuity contract. The $100,000 is split into two accounts. The first is an immediate annuity. This pays Mary a monthly income. The balance of the $100,000 is put into a deferred annuity which grows at interest. Let's take a look at each of these accounts in more detail.
The advantage of the immediate annuity portion is that it can pay Mary a higher income that her CD. Second, unlike her CD, which is all taxed, Mary will pay no tax on a percentage of the income produced by the immediate annuity portion of the split annuity. Assuming a ten year payout, the amount excluded from tax could exceed 80%.
The benefit of the deferred annuity portion is that it grows tax-deferred. This part of the split annuity is designed to grow the total account back to the original $100,000 at the end of the chosen time frame. The net result is more income for Mary without increasing her risk.
That is the basic premise of a split annuity. This assumes using one insurance company's product: a self-contained split annuity contract.
However, my experience is that you can do better if you use two insurance companies. By shopping around, you can find an immediate annuity that pays more than the immediate annuity portion of a single split annuity policy. Similarly, you usually can find a deferred annuity that pays more than the deferred annuity portion of a standalone split annuity contract. So don't just stop with having your financial planner go grab a split annuity off the shelf. Have him or her find the most competitive immediate annuity and the most competitive deferred annuity and “make your own” split annuity.
The other advantage of using two products is that some companies offer what's called a “bonus” annuity. To attract your business, they will give you a bonus for moving your money over to them. The amount is a function of interest rates and the length of the deferred annuity; in general, it can range from 5% to 10%. But the key is that the bonus is paid up front, so you earn interest on both the money you put into the deferred annuity and the bonus right from the get go.
As you have seen above, the plain vanilla split annuity is designed to have you wind up with the same amount of money you started with, but with more spendable income during the annuity time frame. Using a two insurance company approach and a bonus annuity, you could end up with more spendable income and more money. Put these two facts together and it makes the split annuity approach even more attractive.
But can we do even better for Mary? Possibly, yes, if she is willing to take a modest risk.
This alternative would place the deferred annuity portion into an equity indexed annuity. This is a subject all to itself, but let me simplify the definition of an equity indexed annuity by saying that it is an annuity where interest is credited according to the performance of one of the major stock indexes, such as the S&P 500. The annuity can only go up; it cannot go down. If the S&P 500, for example, goes up, the account goes up. If the S&P goes down, the account stays the same. There are some equity indexed annuities that also pay a bonus up front.
If Mary were to choose this alternative, she might be able to end up with an account that is worth more than her original $100,000 at the end of whatever time frame she chooses.
I hope you take away at least two points from this article. First, for the many people who are in Mary's situation (own a CD and need more income), investigating how a split annuity might produce more income would be a smart move. Second, there are a lot of variables that have an effect on whether or not a split annuity is the best solution.
That's why there are financial planners. Sit down with one; explain your situation and objectives. Maybe a split annuity will fit the bill.
Robert D. Cavanaugh, CLU is a 36 year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. To subscribe and get the free video, “How to Sell Your Life Insurance Policy for More Than the Cash Value”, go to http://theestatepreservationadvisor.com/freevideo.htm
.by Robert D. Cavanaugh, CLU


There are several ways to squeeze more income out of a given amount of capital invested in a CD. Let me share with you the split annuity concept.
Here is an example typical of many people. Mary is 75. She is a conservative investor. She has to be because she has a limited amount of capital. On the one hand, she has to play it safe; on the other hand she needs to get as much income out of her assets as she can.
She has a $100,000 5 year CD down at the bank. It is paying 4.87% interest a year. Given her objectives of earning the most she can, not taking any risk of losing the principal and her concern for the fact that prices at the grocery store keep going up, she has at least two problems.
The first is the fact that the interest on her CD is taxable. In her 15% bracket, 4.87% nets out to 4.14%. Second, her $100,000 is not growing, so her income is not keeping up with the increases in the cost of living.
Can Mary do better?
Most likely she can. She can increase her after tax spendable income without risking her principal pretty easily. She might even be able to increase her $100,000 over time to boot. One of the ways is by using a split annuity.
The concept behind a split annuity is simple. Mary transfers her CD to an insurance company's split annuity contract. The $100,000 is split into two accounts. The first is an immediate annuity. This pays Mary a monthly income. The balance of the $100,000 is put into a deferred annuity which grows at interest. Let's take a look at each of these accounts in more detail.
The advantage of the immediate annuity portion is that it can pay Mary a higher income that her CD. Second, unlike her CD, which is all taxed, Mary will pay no tax on a percentage of the income produced by the immediate annuity portion of the split annuity. Assuming a ten year payout, the amount excluded from tax could exceed 80%.
The benefit of the deferred annuity portion is that it grows tax-deferred. This part of the split annuity is designed to grow the total account back to the original $100,000 at the end of the chosen time frame. The net result is more income for Mary without increasing her risk.
That is the basic premise of a split annuity. This assumes using one insurance company's product: a self-contained split annuity contract.
However, my experience is that you can do better if you use two insurance companies. By shopping around, you can find an immediate annuity that pays more than the immediate annuity portion of a single split annuity policy. Similarly, you usually can find a deferred annuity that pays more than the deferred annuity portion of a standalone split annuity contract. So don't just stop with having your financial planner go grab a split annuity off the shelf. Have him or her find the most competitive immediate annuity and the most competitive deferred annuity and “make your own” split annuity.
The other advantage of using two products is that some companies offer what's called a “bonus” annuity. To attract your business, they will give you a bonus for moving your money over to them. The amount is a function of interest rates and the length of the deferred annuity; in general, it can range from 5% to 10%. But the key is that the bonus is paid up front, so you earn interest on both the money you put into the deferred annuity and the bonus right from the get go.
As you have seen above, the plain vanilla split annuity is designed to have you wind up with the same amount of money you started with, but with more spendable income during the annuity time frame. Using a two insurance company approach and a bonus annuity, you could end up with more spendable income and more money. Put these two facts together and it makes the split annuity approach even more attractive.
But can we do even better for Mary? Possibly, yes, if she is willing to take a modest risk.
This alternative would place the deferred annuity portion into an equity indexed annuity. This is a subject all to itself, but let me simplify the definition of an equity indexed annuity by saying that it is an annuity where interest is credited according to the performance of one of the major stock indexes, such as the S&P 500. The annuity can only go up; it cannot go down. If the S&P 500, for example, goes up, the account goes up. If the S&P goes down, the account stays the same. There are some equity indexed annuities that also pay a bonus up front.
If Mary were to choose this alternative, she might be able to end up with an account that is worth more than her original $100,000 at the end of whatever time frame she chooses.
I hope you take away at least two points from this article. First, for the many people who are in Mary's situation (own a CD and need more income), investigating how a split annuity might produce more income would be a smart move. Second, there are a lot of variables that have an effect on whether or not a split annuity is the best solution.
That's why there are financial planners. Sit down with one; explain your situation and objectives. Maybe a split annuity will fit the bill.

Robert D. Cavanaugh, CLU is a 36 year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. To subscribe and get the free video, “How to Sell Your Life Insurance Policy for More Than the Cash Value”, go to http://theestatepreservationadvisor.com/freevideo.htm

Private Annuity Trusts - Supercharge Your Retirement
By Paula Straub


You have made some great investments in Real Estate or in a Stock Portfolio. Congratulations! Now you are ready to retire on your gains. But wait. To benefit from your investment appreciation, you're going to have to sell some or all of those assets.
If you sell your investment property, you will need to pay capital gains tax to the Federal Government, State, and you will also pay recaptured depreciation. If you're in California, add another 3 1/3% in withholding. That's a huge chunk of change, and a big blow to your savings.
If you sell your stocks, you'll be giving up at least 15% to capital gains. There is also no guarantee that the long term capital gains rate will remain at 15% forever. It could increase down the road.
How can you start receiving income but not get hit with huge amounts of tax?
For real property, there is a 1031 exchange into a tenant in common property. This works well for investors that don't want to manage property anymore, but still enjoy the benefits of real estate ownership. This is a subject covered in many of my previous articles.
There is another powerful concept. It's called a Private Annuity Trust. These trusts have been around since 1939, but until the last few years have primarily been used for Estate Planning purposes. The Private Annuity Trust also works extremely well for Retirement Planning. It is fairly complex to set up and administrate, so many financial planners, real estate brokers, CPAs and Attorneys still don't know much about them.
The procedure is basically this.
1. A Private Annuity Trust is established. You, the seller become the annuitant.
2. A fair market appraisal is done to determine property value.
3. The seller can negotiate a sale price at the appraised value.
4. The property is transferred to the trust and the trust is now the seller of the property and retains the proceeds.
5. The proceeds are invested by trustees (not the annuitant) and an arrangement is made to pay the annuitant (and perhaps their spouse) in monthly payments for the remainder of their lives. The capital gains tax is spread out over the course of your lifetime. If you pass away before your estimated average calculated life span, the remainder of the assets pass to the beneficiaries. The balance will be passed free of Estate Tax, Gift Tax, Generation skipping tax, and Transfer tax. Any capital gains tax still due will be paid before disbursement.
6. Other properties or stocks can be added to the trust at a later time, and recieve the same benefits.
As an example, let's say you have a million dollar gain on a property. You might very well owe 350K in taxes. With a Private Annuity Trust, all one million goes to work for you, and you can receive montyly income for the rest of your life. The exact amount is determined by your age and the time you choose to begin receiving your payments. You have the option to defer receiving payments until the age of 70 1/2. This allows the assets to grow compounding and tax deferred, and allows for greater income in the future.
The trust removes the assets from your estate, as the trust now owns them and the annuitant relinquishes control over how they are invested.
Setting up a Private Annuity Trust can definitely give a turbo boost to your retirement bottom line. Ask yourself, would you rather give a "gift" to the government in a big lump sum, or would you like to pay in small chunks and have the bulk of your profits working for you and earning compounded interest for years to come?
Paula Straub will guide you through the process of keeping your Capital Gains working for you and generating passive income. To receive your invitation to her free teleconference, visit Save Capital Gains Tax

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4 Yr.
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3 Yr.
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4.73%
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8 Yr.
4.80%
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7 Yr.
4.85%
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Guaranteed Advantage 6
6 Yr.
5.14%
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5 Yr.
5.01%
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4 Yr.
4.55%
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3 Yr.
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Demystifying Annuities
By: Herb Williams
As the celebrated baby boom generation rushes headlong into middle age, more and more attention is being paid to accumulation vehicles that can provide financial security during retirement years. Annuities are one such increasingly popular vehicle.An annuity is, in its most simplistic form, an insurance policy that pays you back while you're alive. As the American population continues to age and realizes that social security and pensions may not be enough, annuities are gaining increased recognition as a funding vehicle for retirement.Unfortunately, as annuities gain in popularity, so too does their complexity. Much like adjustable rate mortgages -- where what you first see, the initial interest rate -- isn't always what you get -- it pays to look at the fine print before plunking your hard-earned money down on an annuity.Paying for an annuity contract is simple enough: either through a single premium up front or through smaller periodic premiums during the life of the contract. Earnings are tax-deferred and payments are made in a lump sum or through installment schedules that range from monthly to yearly. Sifting through the fine print, though, is not quite as simple.

Rule of thumb #1: If the initial interest rate looks too good to be true, it probably is. Fixed annuities often offer extremely attractive initial interest rates, then are adjusted to prevailing interest rates.But did you know that insurance companies can readjust your fixed rate, too? It only stands to reason that an insurer can't pay you eight percent while it's earning less than that on its investments. Look for an annuity's guaranteed interest rate. Some insurers also offer a bailout provision that allows policyowners to terminate their contracts, without incurring costly surrender charges, if the interest rate falls below a stated rate. The best contracts offer a bailout provision when the surrender value falls below the premium you have paid into the contract.

Rule of thumb #2: Look for those hidden extras. Surrender charges are just one example. For instance, an annuity with the highest rate may also be non-surrenderable for five or more years. That means your money, with very few exceptions, is locked in.Now if you're absolutely sure that you'll never need access to your money, that your financial and personal circumstances don't have a thread of a chance of changing during the next 1,826 days, then you'll take the higher rate in return for a non-surrenderable clause. But if you're like most of us, look our for surrender charges which can leave you with little more than you put into the contract.Rule of thumb

#3: Your annuity contract is only as good as the insurance company behind it. Is the issuing company strong and secure? The A.M. Best Company grades insurance companies on reliability and strength. Best's Reports can be found in most libraries. Look for a company which has a financial strength rating of at least B+ or higher. It is also a good idea to find out how the company has treated its policyholders in the past. While not a guarantee, a company's past performance can be a good indicator for how it may perform in the future.Annuities no longer have to be a mystery. By asking the right questions, you can find one that is right for you.
Article Source: http://articlefree4all.com
H.Williams is a 40 year veteran of the financial services industry and a consultant to: Insureme

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Learn About Equity Index Annuities
by: Scott Walker

‘Save for a rainy day’ is a wise old saying and there are many ways you can prepare for the sunset of your life. Investing in an annuity is one way. An annuity is a long-term, interest-paying contract offered through an insurance company or financial institution. An equity indexed annuity is an annuity that earns interest that is linked to a stock or other equity index. Depending on how those stocks fare will determine what you gain. The equity index annuities, as in any kind of investments, have to be kept untouched for a long period. The typical time is a minimum of 7 years. This will ensure that you get the full benefit of having invested in an equity index annuity. The equity index annuities are basically an option of investment that is offered by insurance companies. They actually provide you with the benefit of investing in the stock market without the associated risks of losing your money. So, in an equity index annuity, your principal is never lost and even in a worst case you may take some interest back home. The flip side of this however is that even if the stocks that the equity index annuity is invested in gives high returns, you will not receive the full returns but just a percentage. So you do not get the maximum returns for your equity index annuity but just a part. This is however the compensation that the insurance companies who offer you the equity index annuities receive, for providing you with a safety net throughout the term of the annuity. The percentage of returns (i.e. the gain of the index) that your equity index annuity brings you is determined by the participation rate. This rate is pre-decided and varies and to know this you have to read the fine print prior to signing on the documents. The general participation rate offered for most equity index annuities is between 70 to 90 percent. The equity index annuities are therefore seen as a conservative and prudent investment. They became quite popular during the previous bullish run in the market and insurance companies saw them as an excellent means of combining the security of a guaranteed return with the boom of the stock market. All equity index annuities offer a minimum interest rate and its value also does not fall below the guaranteed minimum percentage of the premium paid i.e. 90 percent at least. However to achieve maximum benefits, your equity index annuities should not be withdrawn before the term. If you do even a partial withdrawal it will definitely affect the interest you receive. Like all investments, this is best kept for a long term. This will also help your equity index annuities even out and recover if the index plunges. As we know the stock market is volatile and this needs to be kept in mind when investing. Also there are definite withdrawal penalties that you would have to pay as well. How then do the insurance agencies benefit from offering equity index annuities? The insurance companies reinvest the premium amounts that you pay and this is usually invested into bonds. Since the participation rate is fixed, they have to pay only those set rates of interest to the investors of the equity index annuities and the insurance companies profit the balance. Equity index annuities are generally affiliated to a particular stock market index such as the S&P 500 or the Dow Jones Industrial Average. However as the equity index annuities combine features of a typical insurance product with the traditional security they do completely fall into each of those specific categories. As a typical insurance product you are guaranteed minimum return and in terms of securities your investment is linked to the equity market. However it all depends on the features that your equity index annuity provides and it may or may not be a security. The typical equity-indexed annuity is not registered with the SEC. So then how does one know which equity index annuity is best for oneself? The only way is to find out as much as you can about the equity index annuity before you decide. Ask a lot of questions like which stock market index does the equity index annuity use? What participation rate is being offered to you? Are there any hidden charges in terms of any fees or deductions payable? You have to run through a number of equity index annuity offerings before making your decision. So save for a rainy day and do it the equity index annuity way!
About The Author
Scott is a consultant at Equity Index Annuities, a directory listing site with all your annuity and finance needs. If you have any other annuity questions please visit http://www.vietnambiology.com/equity_index_annuities.html.

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Not Available
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8 Yr.
4.80%
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MNL Guarantee Plus 7
7 Yr.
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Beneficial Financial
Guaranteed Advantage 6
6 Yr.
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5 Yr.
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Direct Guarantee 4
4 Yr.
4.55%
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Not Available
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Basics Of Investing In Life Annuities
By: Mika Hamilton

It can be extremely hard to save for retirement. It is hard to part with your hard earned money today so it can be used sometime in the distant future. It is just as difficult to save for college, purchasing a new home, and any other financial goals. For the average American, it is a struggle to be able to pay for the monthly bills and still find a bit of money to invest.

Regardless of your income is important to put aside at least a little bit of money every week for savings. If this is done over a number of years a substantial amount of money can be put aside and if worked in into the right investments it can produce a secure financial future.For investors who are new or just leery of the stock market, life annuities are a great choice. This is a way that money can be put away on a consistent basis and then it is given the ability to grow. One of the most common fears is that an individual will outlive their money and have no income in the later years of their life.
Purchasing and investing in a life annuity makes sure this does not happen. An annuity is designed in such a way that an investor is guaranteed an income for the rest of their lives. It can also guarantee a spouse or relative can reap the benefits of the annuities even when the major contributor has passed away.
Having a life annuity means no matter how long you live you will draw the same income each month, even after the money from your original investment has been used up. Therefore you will never outgrow your money..Of course, where to put that money is an important decision as well. Annuities can be a good way to put money away on a regular basis and let it grow. Many people are fearful that they will outlive the money they have so diligently saved for retirement. Using a life annuity can help guarantee that this will not happen to you. Most life annuities have a set period of time period of time which the annuity will pay out (let's say 10 years) or until the person dies, which ever is longer. If you have a life annuity and die after only 5 years then your payments will continue for another five years. Being paid out to your family. However, after 10 years, whatever money is left in your account belong to the annuity company. There is an optional (and more expensive) type of annuity which allows the remainder of the annuity to be paid out to a beneficiary after your death.For example if an individual paid $15,000 premium to create a life annuity, and then died after only receiving $5,000 worth in payment, the annuity owner's beneficiary would be entitled to a refund of the difference. The difference in this case would be $10,000 dollars. If you have money that is readily available this is a great lost risk security option that works well for people who are not interested in the hassle of traditional stock portfolios.

More Articles & Tutorials and a Free Investing For Beginners E-Course at www.Global-Investment-Institute.com

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The Equity Indexed Annuity.
William Burger

The equity index annuity is not magical. It is not something between a fixed and variable annuity. Many people get confused and think it is a variable annuity linked to an index. Well, it is not. It is simply a FIXED annuity. You can’t loose money due to stock market declines, and it exhibits the same principles as any other fixed annuity.

The equity indexed annuity is a fixed annuity that allows you to take advantage of the stock market in the up years and avoid the down years. When the market goes up you can participate in the gains. When the market goes down you won’t loose money. Does this sound to good to be true??? Well, it’s really not and I will explain why.
So how does the indexed annuity work? This is the question that prompts me to write for the benefit of anyone willing to read! First of all, let’s take a look at investments and savings vehicles. They either fall in the category of “opportunity” or in the category of “safety.” What this means is every investment vehicles can fall into one of these two areas.
Think of opportunity vehicles as stocks, bonds, mutual funds, variable annuities or real estate investment trusts. These are investments that allow you the opportunity to make an enhanced rate of return on your money with some risk of principal. That is there primary purpose! They are not designed to protect your principle. Safety of principal is usually foregone to get an enhanced rate of return.
Safety vehicles are CD’s, Fixed Annuities, Treasury Bills and others. The bottom line is these are savings plans with a fixed rate of return in a safe and secure place. The primary purpose is safety with a reasonable rate of return. Investors place their money in these vehicles to keep their Principal SAFE. They are limited because people are willing to accept this because their principal safety is their primary goal.

Investors normally have an interest in one type of an investment or another. Other investors want a portion of their money in an opportunity and a portion in a savings vehicle. That’s called diversification. The perfect investment would be 15% in a Money Market account with unlimited check writing. That ain’t going to happen! No one wants to relive the late 1970’s especially if you are a borrower. I remember those days being in the banking industry.
Furthermore some investors want to be in an opportunity area, but can’t afford to take the risk…they don’t want to lose money. Some investors have a higher risk tolerance and don’t have an interest in safety vehicles. Most intelligent advisors help an investor to determine which portion of their money should go where.
So what does that have to do with the equity indexed annuity??? Great question… I am glad you asked. The equity indexed annuity is unique in that it is a safety vehicle, while giving the element of opportunity without the inherent risk of loss of principal. It crosses the boundary of opportunity with guarantee of principal. Again, it is a fixed annuity with participation in the growth of the indexes in the market. That’s it!!!

About the AuthorWilliam Burgerwburger1@ameritech.netMore Details about Participate in the stock market here.

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Annuities As A Personal Pension
By: Robert Valentine
What do you do when you've already made the maximum yearly contribution to your 401(k) and/or an IRA? What if you're looking for an alternative all together? If either of those situations describes you, then an annuity might be a retirement savings option worth considering. Annuities are sometimes called "personal pensions," because they pay you a guaranteed income during retirement. But how do they work? And are they right for you? You put money into an annuity in return for a steady stream of income after you've retired. Keep in mind annuities are primarily retirement savings vehicles and generally require a minimum number of years you must keep your money in the annuity without facing a penalty when withdrawing from it. Early withdrawals also are subject to surrender charges and a 10 percent penalty if withdrawn before age 59½. However, most annuities have some sort of provision that allows you to withdraw 10% of your funds in an emergency. One of the biggest advantages of annuities lies in taxes. Earnings in an annuity generally offer tax-deferred growth. This is especially helpful if you expect to be in a much lower tax-bracket during retirement. When you wish to begin collecting payments from your annuity, you simply contact the annuity company, which calculates your monthly payment. The amount of the payment is based on your projected lifespan, the amount in your account and your current age. Payments also may depend upon any other types of provisions that you've opted to include. One provision may stipulate that your payments will continue to a living spouse after your death. You also may choose to include a provision that guarantees payment for a number of years, paying your estate if you die before those years are up. Remember that the more provisions you put into your annuity regarding payments, the less your monthly payments are likely to be due to the additional expense of these optional riders. While annuities come in many shapes and sizes, there are two basic categories: immediate and deferred. Immediate annuities are usually associated with a lump sum of money that comes into your possession -- like winning the lottery. While you shouldn't plan on your lucky numbers being drawn any time soon, there are other situations in which an immediate annuity may be best, including receiving an inheritance. You also may choose this option when you reach retirement and decide to put all or most of your previous savings as one lump sum into an immediate annuity.The alternative choice, which is more widely used, is called a deferred annuity and is used to grow your assets and provide a steady income stream during retirement. During the savings and investing phase, your contributions grow tax-deferred. During the retirement income phase, you choose how you'd like to receive withdrawals: systematic, as you need funds or steady income payments (called annuitizing your contract). You choose to receive these payments for a set period of time or guaranteed for life.Deferred annuities can be variable or fixed. With a variable deferred annuity, you usually have the opportunity to receive a minimum monthly payment while also receiving extra money gained from investments. Depending on market performance, your extra amount each month may fluctuate, sometimes greatly. Investment return and principal value of an investment in a variable annuity will fluctuate, and your shares, when redeemed, may be worth more or less than their original cost. But if you're looking to make extra money from your investments, even during retirement, while still being guaranteed a monthly payment, a variable annuity might be for you. If you choose a more conservative approach, a fixed annuity offers the safety of a guaranteed monthly payment, but you miss out on any growth your investment could possibly achieve if it were invested. It is largely considered a "low-risk" investment opportunity. It's also a "low-growth" investment. The safety and any guarantees of an annuity are dependent on the financial strength and claims paying ability of the issuing insurance company, instead of the markets. Many Americans turn to annuities when they've maxed out their yearly contribution to employer-sponsored plans and their own IRAs. Many others use annuities as their sole retirement investment, especially if they wish to include a death benefit for a spouse. Annuities might not be for everyone, so consult a financial professional, but they are one more option available to help you plan for retirement.

Article Source: http://articlefree4all.comRobert Valentine is a well-known expert in the matters concerning investors. His popular Equity Index Annuity article has been published by several publications throughout the United States. Please visit his website, www.themoneyalert.com to view his column.

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How To Have A Guaranteed Income- For Life!
by William Smith

An annuity is a unique financial product, in that it is the only item in the world of personal finance that offers a guarantee.

The values of stocks aren't guaranteed - companies are even legally prohibited from guaranteeing future dividends. Bonds are "fixed income," but they're not really guaranteed - if the issuer goes bankrupt, it stops paying interest and the value of its bonds plummet. That's why for a sure thing in retirement, an annuity isn't just your best bet - it's your only bet.

What is an Annuity?

The literal definition of an annuity is "an annual payment of allowance or income." Although it is possible for an annuity to have the properties of a security, all annuities are guaranteed, to one extent or another, so that makes them insurance products.
In order to sell a traditional annuity, a broker needs an insurance license. In order to sell a variable annuity, a broker needs both an insurance license, and a stockbroker's license.
How Does an Annuity Work?
There are two distinct types of annuities - traditional and variable. A traditional annuity is a purely insurance product. The purchaser of the annuity will begin paying premiums (as with life insurance) for a set period of time.
Then, usually upon retirement, the annuity begins to provide supplemental monthly income to its owner. This income is for a predefined amount and is guaranteed for the duration of its owner's life. Normally, the annuity will also pay a death benefit (again, like life insurance) if its owner dies during a given term.
A variable annuity works differently. The purchaser of a variable annuity still pays premiums, and he or she is still guaranteed an income for life, but as the name would imply, this income is variable.
Each variable annuity guarantees a minimum monthly income - often significantly less than the total amount paid in premiums - but the premiums paid on the annuity are invested by its issuer, with the hope of providing greater returns.
For this reason, variable annuities are considered financial securities - not just insurance products - and thus, anyone who sells them needs a stockbroker's license in addition to a license to sell insurance.
Alternatives to Annuities
The primary appeal of a traditional annuity is that it offers a guaranteed monthly payment of a predefined amount for the rest of your life. The problem is that, due to inflation, this predefined amount might seem like a lot more today than it will be by the time you retire.
Variable annuities are an alternative designed to beat inflation, but studies show that most investors are better off buying traditional life insurance and investing their savings in mutual funds.
There is no doubt that an annuity is the only guarantee in the investment world - but there are alternatives that are nearly as strong, and typically perform better as investments.
United States government securities, for instance, are virtually guaranteed. Since they're backed by the "full faith and credit" of the federal government, the only way they can be defaulted on is if the U.S. government is overthrown. In that case, your annuities probably won't do you much good anyway.
The only real risk you face by buying government securities is inflation, which is also a risk of traditional annuities. But far better than variable annuities, the U.S. government has the ultimate inflation beater - Treasury Inflation Protected Securities.
These bonds have a low interest rate, but the redemption value goes up with inflation. This means you get more in each interest payment as inflation goes up, and when you redeem the bond upon maturity, it cashes out at the inflation adjusted price that you paid for it. If safety is your primary concern, you can't lose.

William Smith the author provides additional financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at Guaranteed Income (All is Free)
Article Source: http://articlefree4all.com

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Annuity Buyer Guides
By Thomas Morva

Annuities are one of the most important and inevitable and lucrative policies for the well being of the senior citizens of America. However, at some crossroads of life one might need to have their future to be planned in a proper way, especially during and after the retirement phase. A senior citizen, anyone of age sixty-five and above, has the full right to utilize his or her insurances, life insurances, liquid assets, pension schemes, financial plans and such other things including the retirement plans. Proper planning is key to the secured future. An annuity is the ideal plan for such phases of life.
The best age to buy an annuity is 55 or older. An annuity is the ideal life planning tool for a senior citizen that comes up to him or her with all the advantages near the end of his life. The person who buys such an annuity plan to secure their post-retirement phase is called the annuity buyer. This annuity buyer has to pay what are called basis points. These are basically the fees for the annuities. The annuity fees or the basis points show a percentage of one’s investment. But one has to be very careful before committing him or herself in buying such annuities. There are a lot of guides on the issue that sometimes prove to be of great use to those who are thinking of buying such annuities. There are books available in the market and there are a lot of online resources as well to guide you through the dos, don’ts and other aspects of annuities.
An example would clear out the importance of annuity buyer guides. All the basic lucrative returns of an annuity is already known to us, but one should pay attention to the fact that one can't withdraw the money until one is 59½ or one is hit with a 10% penalty. There a lot of other such little things about which one should have a prior knowledge. This is where the annuity buyer guides come in useful.
Annuity Buyer provides detailed information on Structured Settlement Annuity Buyer, Annuity Buyer, Annuity Buyer Payments, Annuity Buyer Guides and more.

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Charitable Gift Annuities
By Russell Hill
Charitable Gift Annuities are a contract where the donor(s) give an irrevocable gift of cash or other assets to a qualified charity and receives a charitable deduction. In return, the charity agrees to pay a fixed amount of money to the annuitant(s) for their lifetime. The annuity payments are not "income", a portion of the payments is considered to be a partial tax-free return of the donor's gift, which is spread over the lifetime of the annuitant(s). The contributed property becomes a part of the charity's assets, and the payments are a general obligation of the charity. The charity’s entire assets back the annuity, not just by the value of the contribution. Where the donation is in the form of other assets, securities for example, the value of the gift is determined by the fair market value on the gift date.
Most states that regulate charitable gift annuities require the charity to supply the state with a published gift annuity rate chart of the maximum annuity rate the charity offers each annuitant, listed by actuarial age (age to nearest birthday) on the gift date. While the charity may spend a portion of the contribution immediately, it must maintain sufficient reserves (as determined by state laws) to meet the annuity obligations and satisfy regulatory requirements of the state in which the charitable gift annuities were issued.
Charitable Gift Annuity Agreements There are several types of charitable gift annuities, and not all states permit the use of each type. Generally the charity must submit a sample of each different type of agreement it wishes to offer to the residents of that

Immediate Gift Annuities
Periodic annuity payments can be made monthly, quarterly, semi-annually or annually, as defined in the agreement. With the first payment to start at the end of the period (month, quarter, etc.), immediately following the contribution. Deferred Gift Annuities
Where the annuity payments at a future date chosen by the donor. Deferred annuities payments must be more than one year after the date of the contribution.
Tuition Gift Annuities
The annuity payments start upon the annuitant(s) attaining a specified age. Generally a parent or grandparent for a young child creates these types of gift annuities, with the donor deferring the payments until the child is expected to enter university. The annuitant(s) then has the option of accepting the annuity payments for his or her lifetime, or elect to receive much larger payments for a term of four or five years, as defined in the annuity contract.
Flexible Gift Annuities
The annuity payment starting date is chosen by the annuitant(s). The donor would choose an initial "target date" for the payments to start. The charity would then offer a range of payouts with differing fixed payment amounts and differing starting dates. Since the charitable deduction remains fixed, the annuity rate for each starting date would have to change. The payments would be lower if the starting date was earlier and higher if the starting date was later. Each annuitant would have to determine on an annual basis whether or not they wish the annuity payments to start that year.
Versions of Agreements
Generally, there are three versions of each type of agreement, they are:
1. "Single life" agreement - annuity payments for the lifetime of the annuitant(s),
2. "Two lives in succession" agreement - annuity payments for the lifetime of the annuitant and then pay a second person if he or she survives the annuitant, and
3. "Joint and survivor" agreement - annuity payments to a husband and wife simultaneously, each getting half of the payment, and upon the death of one of the annuitants, pay the survivor the full annuity.
Russell Hill writes articles on a variety of subjects including fixed annuities, variable annuities, indexed annuities and other retirement investment vehicles.