Original Article by Mr. Francis:
Wednesday, January 13, 2010
Looking Forward: On "Retiree Annuities May Be Promoted by Obama Aides" by Theo Francis
Tuesday, January 12, 2010
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. 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.
Monday, January 11, 2010
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”.
Tuesday, December 22, 2009
2012: The End is Near. Are You Prepared?
Thursday, October 8, 2009
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”
Wednesday, September 16, 2009
Emotions and Retirement Income
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
Wednesday, August 12, 2009
Annuity Alternatives
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.