Annuities Reaping Rewards Since The Roman Empire

By Author: Robert Stazzarino
Total Articles: 4762
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Annuities have been yielding dividends to investors since their origination in the early stages of the Roman Empire. In fact, the Roman Annuae were such prudent investments that they emerged again as the Tontine in Europe in the 17th century. Both these investments paid an annual dividend in exchange for a lump sum. The Roman and European governments relied heavily on these investments during times of war.

The Pennsylvania Company for Insurance on Lives and Granting Annuities was the first American company to offer annuities to the public. After their initial offering, it did not take long for other insurance companies to follow suit. During the Great Depression, many Americans turned to insurance companies. Annuities flourished in the 1930's as investors sought the security of safe investments.

In the original annuities, the investor paid a lump sum to the insurance company in exchange for a fixed interest rate of return. When it was time to withdraw principal from the annuity, the investor could opt to receive money for life or for a set period of time. The annuities of the 1930's are remarkably similar ...
... to the Immediate Annuities of today.

One of the most appealing attributes of annuities has always been the tax structure and benefits. As annuities are issued by insurance companies, all earnings enjoy tax-deferred status. As a result, annuity sales continue to increase.

Much like during The Great Depression, Americans have shown support for annuities in recent years. Last year, annuity sales topped the $200 billion mark.

Annuity investments have evolved into four very different programs:

- Fixed Annuities - a fixed annuity pays the investor a fixed rate of return for a specific time. After that time, the investor can withdraw the principal and any unused interest. There are two types of fixed annuities; CD Type Fixed or Traditional Fixed Annuities.

- Immediate Annuities - the insurance company guarantees a fixed rate of interest for a certain term or until the investor dies, whichever lasts longer.

- Equity Indexed Annuities - a long-term investment that allows the investor to invest into a stock market index such as the S-P 500. The downside potential is limited to a fixed rate generally 2-3%, while the upside is linked to the participating index.

- Immediate Annuities - provide the lump sum investor a fixed stream of income for as long as the investor lives. The amount of income depends upon a number of different factors; Age, Sex, Initial Dollar Amount, Time until income is needed, and Payout Options.

Each type of annuity offers slightly different tax implications. However, the interest on all annuities is tax deferred. Like IRA's, there are substantial penalties for early withdrawal.

One of the impressive benefits of most annuities is the advantage of having the principal and accrued interest earn tax-deferred income as the investment matures. During the current recession, much like in the Great Depression, where equity markets are 38-40% below their highs and where investments like 401k's have been devastated by the falling values in stocks, certain annuities have continued to reap dividends and build equity.

Whereas investors in equities are prolonging their retirements and forced to work harder than ever, annuity investors have fared quite well. Below is a list of annuity advantages:

- Competitive rates of return
- Guaranteed minimum interest rate
- Guarantee of Principal
- Tax deferred earning potential
- Death benefit protection
- No minimum withdrawal requirement
- Flexible premium payments
- Guaranteed income stream
- Flexible systematic withdrawals
- Ability to withdraw the surrender value in one lump sum

Annuities are safe, predictable, secure and provide substantial tax benefits. Find out what the early Romans learned about the value of this age-old form of investment.
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