What Are Some Fixed Deferred Annuity Contract Benefits?

Annuity income payments

One of the most important benefits of deferred annuities is your ability to use the value built up during the accumulation period to give you a lump sum payment or to make income payments during the payout period. Income payments are usually made monthly but you may choose to receive them less often. The size of the income payments is based on the accumulated value in your annuity and the benefit rate which is in effect when payments start.

The benefit rate usually depends on your age, sex, and the annuity payment option you choose, if it is a lifetime payout. For example, you might choose payments that continue as long as you live, as long as your spouse lives, or only for a set number of years. There is a table of guaranteed benefit rates in each annuity contract.

Most companies have current benefit rates as well. The company can change the current rate at any time, but it can never be less than the guaranteed benefit rates.

When income payments start, the insurance company uses the benefit rate in effect at that time to figure the amount of your income payment. Companies may offer various income payment options, and you, or another person of your choice, may choose the option.

Life only

The company pays income for your lifetime, but doesn't make any payments to anyone after you die. You might choose this option if you have no dependents, if you have taken care of them through other means or if the dependents have enough income of their own. This payment option usually pays the highest income possible.

Life annuity with period certain

The company pays income for as long as you live and guarantees to make payments for a set number of years - called the period certain - even if you die. The period certain is usually 10 or 20 years. If you live longer than the period certain, you will still continue to receive payments until you die. However, if you die during the period certain, your beneficiary gets regular payments for the rest of that period. If you die after the period certain, your beneficiary does not receive any payments from your annuity. Each income payment will be smaller than in a life-only income option, because the period certain is an added benefit.

Joint and survivor

The company pays income as long as either you or your beneficiary lives. You may choose to decrease the amount of the payments after your death, or you may be able to choose to have payments continue for only a set length of time. Again, because the survivor feature is an added benefit, each income payment is smaller than in a life-only income option.

Death benefit

In some annuity contracts, the company may pay a death benefit to your beneficiary if you die before the income payments start. The most common death benefit is the contract value or the premiums paid, whichever is more.

About this Blog:

Understanding what is available to you is more important now then ever. Learn How to Retire is part of your educational journey and was developed to help you find the new Safe Money alternatives you need to accomplish your retirement goals. In today’s economic environment one must realize that the only way to find success is through individual empowerment. Once you have taken the time to educate yourself you only then have the power to make the right decisions and put the trust factor on your shoulders. The more you know the more you will succeed. www.LearnHowToRetire.com is “Individual Empowerment” Once you have taken the steps to understand then you are free to find the qualified and trusted advisor to help take your knowledge and formulate a plan. www.safemoneyrep.com “Where People Find Trusted and Qualified Advice”

About this Blog:
Understanding what is available to you is more important now then ever. Learn How to Retire is part of your educational journey and was developed to help you find the new Safe Money alternatives you need to accomplish your retirement goals. In today’s economic environment one must realize that the only way to find success is through individual empowerment. Once you have taken the time to educate yourself you only then have the power to make the right decisions and put the trust factor on your shoulders. The more you know the more you will succeed. LearnHowToRetire.com is “Individual Empowerment” Once you have taken the steps to understand then you are free to find the qualified and trusted advisor to help take your knowledge and formulate a plan. Safemoneyrep.com: Where People Find Trusted and Qualified Advice.

What charges or fees may be subtracted from my fixed deferred annuity?

Most annuities have charges related to the cost of selling or servicing it. These charges may be subtracted directly from the contract value. Ask your agent or the company to describe the charges that apply to your annuity, if any.

Surrender of withdrawal charges

If you need access to your money, you may be able to take all or part of the value out of your annuity at any time during the accumulation period. If you take out part of the value, you may pay a withdrawal charge. If you take out all of the value and surrender, or terminate, the annuity, you may pay a surrender charge. In either case, the company will figure the charge as a set percentage of the value of the contract, of the premiums you have paid or of the amount you are withdrawing. The company may reduce or even eliminate the surrender charge after you've had the contract for a stated number of years (term). A company may also waive the surrender charge when it pays a death benefit.

Some annuities have stated terms. When the term is up, the contract may automatically expire or renew. You are usually given a short period of time, called a window, to decide if you want to renew or surrender the annuity. If you surrender during the window, you won't have to pay surrender charges, but if you renew, the surrender or withdrawal charges may start over.

For some annuities, there is no charge if you surrender your contract when the company's current interest rate falls below a certain level. This is sometimes called a bail out option.

In a flexible premium annuity, the surrender charge may apply to each premium paid for a certain period of time. This may be called a rolling surrender or withdrawal charge. Some annuity contracts have a market value adjustment feature. If interest rates are different when you surrender your annuity than when you bought it, a market value adjustment (MVA) may make the cash surrender value higher or lower. Since you and the insurance company share this risk, an annuity with an MVA feature may credit a higher rate than an annuity without that feature.

Free withdrawal

Your annuity may have a limited free withdrawal feature. That lets you make one or more withdrawals without a charge. The size of the free withdrawal is often limited to a set percentage of your annuity contract value. If you make a larger withdrawal, you may pay withdrawal charges. You may lose any interest above the minimum guaranteed rate on the amount withdrawn.

Some annuities waive withdrawal charges in certain situations, such as death, confinement in a nursing home or terminal illness.

Contract fee

A contract fee is a flat dollar amount charged either once or annually.

Transaction fee

A transaction fee is a charge per premium payment or other transaction.

Percentage of premium charge

A percentage of premium charge is a charge determined from each premium paid. The percentage may be lower after the contract has been in force for a certain number of years, or after total premiums paid have reached a certain amount.

Premium tax

Some states charge a tax on annuities. The insurance company pays this tax to the state. The company may subtract the amount of the tax when you pay the premium, when you withdraw your contract value, when you start to receive income payments or when it pays a death benefit to your beneficiary.

Our Expert Advisors are always available to answer your questions. To learn more about charges and fees associated with fixed deferred annuities click here.

To speak with an advisor in your area click here.

About this Blog:
Understanding what is available to you is more important now then ever. Learn How to Retire is part of your educational journey and was developed to help you find the new Safe Money alternatives you need to accomplish your retirement goals. In today’s economic environment one must realize that the only way to find success is through individual empowerment. Once you have taken the time to educate yourself you only then have the power to make the right decisions and put the trust factor on your shoulders. The more you know the more you will succeed. www.LearnHowToRetire.com is “Individual Empowerment” Once you have taken the steps to understand then you are free to find the qualified and trusted advisor to help take your knowledge and formulate a plan.www.safemoneyrep.com “Where People Find Trusted and Qualified Advice”.

2012: The End is Near. Are You Prepared?

That's right folks. The end of the world. We are going to be done in by one of a number of scheduled calamities or some combination of them. Our prospects are not bright when you consider the fact that the Mayan Calendar comes to a sudden and abrupt end on 12-21-2012, when the earth finds itself aligned with the sun and a gaping hole in the center of our galaxy at the height of the solar maximum.

Not to mention that this time frame is cited in a number of apocalyptic texts, and there are asteroids we don't even know of hurtling towards us, and the geo-thermal cauldron is due for it's regular, every- sixty-five million-years-or-so explosion, probably under Yellow Stone national park, and the magnetic poles are due to shift.

Also, the History Channel has all but dedicated all of its programming to the subject, and of course there was the recent blockbuster movie delineating our various demise opportunities.

From so many angles, we are in for it.

What I do know is this: Catastrophe aside, the average lifespan for a US citizen is a healthy one that reaches into seven decades, somewhat longer than we would like to be working. And given the fragility of our financial markets and the frightening reliance of our blue chip stocks on credit, I am sometimes more scared of surviving the end. When it comes to our finances the end of life is not the true concern, it is the end of our savings. Every year it cost us more just to live the way we are accustomed to.

Armageddon or not, it is never too early or too late to take control of our monetary future and empower ourselves through financial awareness and education. The internet is endless and has allowed us to use the knowledge of others to transform the way we think and the way we make decisions. Take advantage of the resources available to you, especially when it comes to your retirement concerns.

Take some time to find ways to lock your retirement income tight and keep it growing guaranteed,View this chart to see what I mean.

About this Blog:

Understanding what is available to you is more important now then ever. Learn How to Retire is part of your educational journey and was developed to help you find the new Safe Money alternativesyou need to accomplish your retirement goals. In today’s economic environment one must realize that the only way to find success is through individual empowerment. Once you have taken the time to educate yourself you only then have the power to make the right decisions and put the trust factor on your shoulders. The more you know the more you will succeed.

www.LearnHowToRetire.com is “Individual Empowerment” Once you have taken the steps to understand then you are free to find the qualified and trusted advisor to help take your knowledge and formulate a plan.

www.safemoneyrep.com “Where People Find Trusted and Qualified Advice"

Real World Index Annuity Returns

The Wharton Financial Institutions Center from the prestigious Wharton School (of Business) at the University of Pennsylvania released a study yesterday entitled Real World Index Annuity Returns. This study provides the first empirical exploration of fixed indexed annuity returns based upon actual contracts that were sold and actual interest that was credited on those contracts. The study includes the following findings, none of which should be surprising:

• FIA returns have been competitive with alternative portfolios of stocks and bonds.
• FIA design has limited the downside returns associated with declining markets.
• FIAs have achieved respectable returns in more robust equity markets.
• Studies that have criticized FIAs are typically based on hypothesized crediting rate formulae, constant participation rates and caps, and unrealistic simulations of stock market and interest rate behavior. When actual policy data are used, the conclusions change.

The Wharton study concluded that from 1997 through 2007, for the contracts examined, five-year annualized returns for FIAs averaged 5.79%. These returns compare to 5.39% for taxable bond funds and 4.73% for traditional fixed annuities over the same period. The study also found that for the period from April 1996 through December 2008, a specific and typical FIA's returns bested the S&P 500 alone 66% of the time and a 50/50 mix of one-year Treasury Bills and the S&P 500 80% of the time.

Not surprisingly, the study finds that FIAs are particularly desirable for consumers who are especially concerned with avoiding losses because they are "designed in a way to avoid downside risk [and] they tend to produce preferred return patterns for such [risk-averse] consumers when compared to alternative investment strategies that expose consumers to significant levels of that risk."

The study's conclusion won't be a surprise to those familiar with FIAs:

How will index annuities perform in the future? We do not know but the concept has proven to work in the past and any articles should reflect this. FIAs were not designed to be direct competitors of index investing nor have FIAs been promoted to provide returns to compete with equity mutual funds or ETFs. The FIA is designed for safety of principal with returns linked to upside market performance.

We already knew that an FIA can be a good product for nearly any consumer and that FIAs are particularly advantageous for risk-averse consumers. The Wharton Financial Institutions Center has now provided a powerful tool -- from a respected an unbiased authority -- to support and substantiate what we already knew.

Real World Index Annuity Returns

About this Blog:

Understanding what is available to you is more important now then ever. Learn How to Retire is part of your educational journey and was developed to help you find the new Safe Money alternatives you need to accomplish your retirement goals. In today’s economic environment one must realize that the only way to find success is through individual empowerment. Once you have taken the time to educate yourself you only then have the power to make the right decisions and put the trust factor on your shoulders. The more you know the more you will succeed. www.LearnHowToRetire.com is “Individual Empowerment” Once you have taken the steps to understand then you are free to find the qualified and trusted advisor to help take your knowledge and formulate a plan. www.safemoneyrep.com “Where People Find Trusted and Qualified Advice”

Emotions and Retirement Income

Emotions drive almost all of our decisions in life. If I were in my late 50’s early 60’s and my broker did not have my investments diversified properly I may have lost 40% of my retirement money this year. I think I would be a little upset and want to do something about it. In such a devastating situation your accumulation timeline to accrue the money you need to live in retirement has now drastically changed; therefore requiring a new financial game plan, an undiversified gamble is no longer the recommended approach.

Knowing that interest rates are at an all time low and that I can only receive a 5 yr guaranteed bank CD at about 2% annually I would think a good portion of your retirement money would be better suited in a 5 yr annuity at 4-5% tax deferred. That would make a lot more sense; you should always at least try to keep up with inflation. There is also 1-3 yr Multi Year Guarantee Annuities available at 2-3.5% annually.

Gambling is not for everyone and especially for the ones that have already gambled and lost big. You don’t have to gamble with your retirement money anymore. There are alternatives available that will not only guarantee your principal but also give you indexed linked returns that can never go backwards. You will not get all of the index growth but you will also not get any of the index loss. For example: if the S & P 500 goes up 10% in a year you could get 8.5% for that year depending on the product you chose. If the S & P was to go down you would not lose a dime and receive 0% for that year. Every year your gains will lock in never to be lost. There are still other Safe Money Alternatives available for those who are considering retirement in the next 5-20yrs that will guarantee between a 5-8% return annually as long as you use these funds for a guaranteed lifetime income, any unspent cash values will go immediately to your beneficiaries at the time of death. These products also allow you to participate in index linked gains while accessing your lifetime retirement income.

As I said earlier diversification has always been the key to success and that is why these strategies are just for the Safe Money assets you have “The money you can not afford to lose” The older you get the higher percentage of your assets belong in the Safe Money category. To get a better understanding and more answers to some of your most immediate retirement concerns visit www.LearnHowToRetire.com

Annuity Alternatives

On the one hand you have what has been shown to work, meaning it supplies you with retirement income: The fixed-indexed annuity. On the other hand you have new products being engineered by brokerages because what they have always said would work, didn't... umm... well... work. Now I am more about the deeper historical data than I am the recent trends, but I have to point this out since I made mention of it in my last post: FIAs are growing in popularity because they make sense. They just do. There has been, to say the least, an explosive increase in consumer interest of fixed-indexed annuities.

Now I had planned on providing a boring old statistical comparison of CDs and FIAs over the last twenty years, but during the last week I noticed a lot more rhetorical traffic around "annuity alternatives." I think now is a good time to stop and put a few volleys back in the serving court where they belong. What I mean is this: don't listen to the crazy talk.

Yep there it is again. This time, it is coming from the engineers of doom themselves. The very ones who helped you lose your money are peddling "safer" products.

Where were these products last year, when the drunk-drivers owned the road? Why is their advice now worthwhile and worth another whirl? That was a rhetorical question. Not for nothing, the hangovers own the road today and they kept their licenses. Lesson: drive carefully.

Alright, I've gone overboard. For one thing, if there is a mutual fund company I would recommend, it goes by the name Vanguard. In my opinion, the class of the industry. I don't mean to bad-mouth this organization because their practices, to my knowledge, are certainly not representative of the bad behavior of the industry in the horribleness that ensued last year. That being said, I don't recommend mutual fund companies. I don't like the risk. I want a boat in retirement. It doesn't need to be ninety feet long anymore if ninety feet means it could easily be particle board in the surf, depending on the seas.

I have no trust in the market or those that play it. I want guarantees. I don't want alternatives to guarantees. I lost a lot of bank last year on the advice of securities experts. I'll take my pension, thank you. I created my own pension with a Safe Money representative. It'll be there when I get there (retirement). I will lose nothing, regardless of another tanking market. My money is safe. The alternative to safe money is called gambling.

Fixed Indexed Annuities are growing in popularity because they make Sense

I was listening to this guy today. A pretty sharp guy, more or less, is what I thought as I took in what he was saying, until he started with the crazy talk. I can spot crazy talk pretty quick these days, when it comes to money. Listening to crazy talk cost me a healthy chunk of my retirement savings recently, and you know the saying, "Fool me twice..."; I tend to be on guard and on the lookout for crazy talk. (FYI, at the time, it was the stock advice from all the expert advisors.) So when this otherwise reasonable fellow starts telling me that it is madness to purchase an annuity these days because interests rates are going to fly and the market is going to boom, my crazy talk antennae go straight up. You know how I spot crazy talk. Crazy talk predicts the future. Crazy talk speculates and tells me what I need to do with my retirement savings. I don't listen to crazy talk. Neither should you.

Stop the madness, the crazy talker says: It is unwise to lock in for 5 years because some very smart people think interest rates are going to rise. Unless you desperately need to earn an extra two percent, keep your money in a money market account. Current money market rates are at 1%.

What kind of advice is that?

I'll tell you what kind of advice that is. It is unsound advice. Keep on earning 1% and don't earn an extra 2 percent where you can? What is left out and is important is the gains you earn with your annuity are tax-deferred. What else is important is this advice ignores inflation. If the recommendation is to keep your money liquid, so you can move it into a risky fund at some unspecified point in the future, or when CD rates or money market rates suddenly pay exuberant returns, the recommendation will only cost you money. I am reminded of something I heard recently: "Brokers are only finding more creative ways to lose you money". This is one of the most creative yet.

If you keep your money liquid by not saving it or putting it into a low return money market account, you are actually losing money to inflation. I point you to our last post about the importance of making sure your investment returns out-pace inflation.

If you put funds into a fixed indexed annuity, you benefit from market index growth, your principle is protected from the losses that many us of suffered last year when the markets went over a cliff due to the sub-prime mess (one of my IRAs lost 40%, and as you know, I was not alone), your returns out-pace inflation and your gains are tax-deferred.

What else is important is if you extend your investment horizon, you earn more. We are talking about retirement savings here. We aren't talking about casino money. You should be looking to lock it up longer so there is more income in retirement.

To provide more insight into the soundness of the FIA strategy, and the unsoundness of brokers' recommendation to avoid them, we will be turning again and again to history (markets, interest rates, policy) in this blog, because it is true that those who do not learn from it are doomed to repeat it. Our business is your financial security. We want you to learn from history (which is why our domain name is learnhowtoretire.com and not learnhowtogambleyourretirementsavings.com or learnhowtoloseyourretirementsavingsbylisteningtoyourbroker.com). We provide the history, and connect you to local, independent representatives that will advise you on how keep your money safe and create your own personal pension.