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Articles By simon cronje

Immediate Annuity Gives You A Guaranteed Cash Flow Of 6%   By: simon cronje
An immediate annuity is an insurance company contract that pays you a guaranteed monthly (or yearly) income for a stated period of time. The payments are guaranteed by the company that issues the annuity, so this transaction should be undertaken with a well-rated insurer. When an immediate annuity is purchased with after-tax money, each payment is treated by the IRS partially as a return of principal, therefore tax free. The rest of the payment is taxable interest. Some immediate annuities are tied to life expectancy; others are not. In a Period Certain or Term Certain annuity payments are made for a guaranteed number of years. If the owner dies, the payments continue to the beneficiaries for the remainder of the contract term. Immediate annuities promise to yield a stream of regular income that is a great support for the retirees who do not have any source of regular income. As per this plan, the retired people receive a certain amount of money by check on a fixed date every month. They do not have to wain for means to meet their monthly expenses. Exclusion ration is one of the benefits of immediate annuity. It refers to the principal amount of annuity, that is not taxable as the principal money is repayable. Hence, tax is levied only on the interest. Thus, the tax that immediate annuities require the holders to pay is lower than that of other investment options. Immediate annuities come with protection from creditors during times of financial hardship. Hence, going for immediate annuity is a good option for those who are on the verge of bankruptcy. Immediate annuity plans promise better returns. When the interest rates spiral downwards as well as returns from the other fixed deposit schemes shrinks, immediate annuities offer attractive returns. Now we are ready for the annuity math. You can purchase a 25 year Period Certain immediate annuity that will generate payments of $539 per $100,000 premium. Income of $539 each month will be paid for 300 months or $6,468 per year for 25 years. That's a cash flow rate greater than 6% a year. What's better is that 75% of each payment is considered a tax-free return of principal. To request a personalized immediate annuity quotation using your own dollar amounts goes to http://www.totalreturnannuities.com/annuities-immediate/.(read entire article)
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Category : Investing / Finance

Get The Hang Of Life Income Annuity Programs   By: simon cronje
Financial stability is required in every stage of life. An income or life annuity is an insurance contract that is designed by a life insurance company. This plan provides an additional monthly income besides that provided by any pension or social security amounts received by a retiree. An individual pays a premium to an insurance company which in turn makes payouts to help meet the person’s future income needs. A life annuity can be easily enrolled in. The premium paid by the annuitant in a lump sum is referred to as a single premium income annuity. The premium may also be paid over time as a flexible premium annuity. The one-time single payment is classified as an immediate income annuity. A multiple-paid or flexible premium is usually applied for a deferred income annuity, when payments to the retiree will start years in the future. An immediate income annuity allows you to begin your annuity period instantly, as soon as thirty days from your premium payment. A deferred annuity may accumulate interest on the premium for a long period of time. As far as the amount received in an income annuity is concerned, it completely depends upon the duration of payments expected. The other factors that influence the amount of payment to be made to the annuitant are the life expectancy along with the interest rates applied in the annuity. The flow of payments from the life annuity issuer to the annuitant ends on the date on which the buyer passes away. As soon as the annuitant dies in a life annuity, the contract terminates. However, a retiree can name a beneficiary within the agreement, and the payments will continue beyond death in a life with period certain annuity. The monthly payments, however, are usually smaller than in a life only annuity. A life annuity contract can also have provisions for a joint annuitant. A joint annuity policy allows for payments to continue to a second annuitant after the death of the first annuitant. Joint annuity policies are beneficial for two related individuals including spouse or non-spouse. Both of the individuals who are annuity holders draw lucrative compensation from this kind of life annuity, when the annuity plan matures. Any of the annuity holders can obtain the lifetime compensation in the event of the other's death. If one of the holders of a joint life annuity plan is a non-spouse, then several considerations need to be taken. (read entire article)
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Category : Investing / Finance

A Glimpse Of Annuity Tax Benefit And Death Benefit   By: simon cronje
What is an Annuity? Most people have no idea what the word "Annuity" means. Because you do not know what an annuity is, you may not consider investing in an annuity contract. Reading annuity sales brochures, deciding if you will purchase one, and knowing what type to buy is no easy task. Let’s cut through the complexity of annuities to help you determine whether they are the right long-term product for your future. Annuities are retirement planning tools that have two phases--accumulation and annuitization. During the accumulation phase, you pay a specified amount to an insurance or investment company over a period of time or in a lump sum. Your money earns a rate of return called interest. During the annuitization phase, you can begin withdrawing regular payments (such as monthly or annually) from your annuity contract until you die. Annuity Death Benefit The annuity has a death benefit. This benefit is not like one in a life insurance policy. Upon your death before you have begun the annuitization phase, your beneficiary will receive either the current value of your annuity or the amount you have paid into it, whichever amount is higher. For instance, if your investments are performing poorly when you die and your account value is less than what you have paid in, your beneficiary would receive the amount you paid in. When you annuitize (begin receiving payments), the death benefit is no longer available on your contract. If you annuitize at age 65 and die at age 67, the insurance company keeps your money. If you want your beneficiary to continue receiving payments after your death, you can buy "term certain" annuities. These annuities guarantee that either you or your beneficiary will receive payments for a certain period of time, such as 10 to 15 years. For example, if you died three years after you began receiving payments from a 10-year term certain annuity, your beneficiary would still receive payments for the next seven years. Annuity Tax Benefits The money that you pay into your annuity grows tax-deferred. This means that your money is not taxable until you begin to receive payments from your annuity. Once you receive payments, your gains are assessed taxes at your ordinary income tax rate. If you die before you annuitize, your beneficiary pays taxes on the death benefit. In either case, the person who receives the money (the annuity holder or your beneficiary) is taxed at his or her ordinary income tax rate. Who Should Buy Annuities? An ideal annuity candidate is 55 or older. Younger investors find the ten percent tax penalty for early withdrawal unappealing. Unless withdrawal occurs for death or disability, a penalty must be paid for withdrawing before age 59 ½. If you have already retired and need annuity income right away, consider buying immediate annuities. Immediate annuities skip the accumulation phase and begin to issue payments as soon as you invest in the contract. Exchange Your Annuity Another option you may want to consider is switching one annuity for another. You can do this without paying taxes. Exchanging one contract for another is a 1035 exchange (named after Section 1035 of the federal tax code). In a 1035 exchange, you can exchange one life insurance policy for a completely different life insurance policy, an annuity for another annuity, or a life insurance policy for an annuity without paying taxes; however, you cannot exchange an annuity for a life insurance policy without paying taxes on the gains in your annuity contract. Do you need to tap into your money before the surrender period? Some insurers will allow you to access a small percentage of your investment, about 10 to 15 percent, under certain circumstances such as serious illness or disability. After the surrender period, you can withdraw as much money from your annuity as you want. Just remember that any money you withdraw before age 59½ is subject to a ten percent penalty tax. If you made your maximum contribution to your existing tax-deferred retirement plan (401(k), 403(b), or IRA), you are the ideal annuity buyer. That's because you are already building up tax-deferred money in those plans, and the fees associated with those savings vehicles usually are much lower than those of Annuities.(read entire article)
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Category : Investing / Finance

Taking The Confusion Out Of Annuities   By: simon cronje
What are Annuities? Annuities are contracts between the insurance company and a person investing in a retirement income plan. They come in all shapes and sizes to fit the divergent types of consumers whose needs they serve. Having the right information about annuities in an understandable format will help you decide which annuity you may want to purchase. Annuities can be purchased in two different ways. An investor can pay one large sum of money to purchase a single-premium annuity. Once this type of annuity is chosen, further contributions are not possible. The investor will have to purchase a new annuity. Flexible-payment annuities can receive ongoing investment of funds. The investor is free to decide the time intervals between contributions to their annuity. Fixed Annuities A guaranteed interest rate offers conservative investors the stability they want in a fixed rate annuity. The guaranteed rate lasts for a specified period. Once the first period is over, a rate adjustment occurs for the next period. The Federal Deposit Insurance Corporation (FDIC) backs some forms of investments. Unfortunately, The FDIC does not guarantee annuities. Instead, the strength of annuities lies in the financial stability of the issuing insurance company. Before purchasing your annuity, speak with your broker about the financial rating of the insurance company providing your annuity contract. Variable Annuities Variable annuities have fluctuating rates of return based on investments in stocks, bonds, or money market accounts. Somewhat similar to mutual funds, variable annuities offer a high rate of return if the fund your money is in performs well. A downturn in the market will bring a decrease in the principal and interest amounts of your annuity. These investments are higher risk because you can lose ground not only on your interest, but also on your original investment. Variable annuities offer a wide range of investment options. Some have a fixed account option. Similar to a fixed annuity, fixed account option variable annuities guarantee principal and interest. You can take some of your money and put it in a higher risk account while saving the rest in a more stable low risk account. Asset allocation programs are available in some variable annuities. These programs help you decide where you should place your money based on your circumstances. With variable annuities, you can move your money between funds while maintaining your tax deferred status. In other words, you can take your money out of a high-risk account, and transfer it to a low-risk account within the same annuity while avoiding a tax payment on that money. This allows you to switch your money to take advantage of market trends without the worry of additional taxes. Expenses of Variable and Fixed Annuities There are higher fees associated with variable annuities than with fixed annuities. Some companies take the cost of annuity expenses and fees into consideration when they decide the periodic interest rates they will pay investors for their fixed annuities. Fees for variable annuities are more complicated. Companies may have an annual contract charge for administrative and surrender fees along with a mortality and risk expense charge. The risk expense charge helps cover the death benefit, expense level, and available payment options. Variable annuities also charge fees to pay for management and operating expenses. These fees may pay the fund manager’s salary or printing costs for the fund prospectus. A variable fund prospectus will be given to you prior to purchasing this annuity. Make sure to read it carefully before making your decision. The prospectus contains valuable information about applicable fees and other annuity details. (read entire article)
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Category : Investing / Finance

Advantages Of A Deferred Annuity Including Retirement Benefits   By: simon cronje
Should You Buy a Deferred Annuity? Deferred annuities offer many advantages to investors: Tax deferred investments grow without being taxed until withdrawal.  At retirement, you may find yourself in a lower tax bracket.  You will now pay fewer dollars in taxes on all of your earnings, including your annuity investment. Deferred annuities have no cap on contributions.  While the IRS limits contributions to other types of investments like the IRA, there is no such limit on annuities. You can use earnings from your annuity to fund other investments and still avoid taxes. Your heirs can receive a death benefit.  If your death occurs before you withdraw funds, your beneficiaries will receive the remaining balance of your annuity without waiting for probate.  Funds will be distributed immediately.  Surviving spouses, as new owners of annuities, can choose to continue saving or receiving payments.  If distribution of income had begun at the time of death, beneficiaries would continue receiving payouts at the same rate as you did.  Beneficiaries inheriting annuities, which have not begun distribution, can choose a lump sum payment.  Taxes will be due and payable on any benefits received. Immediate Annuities Immediate annuities are purchased by making one large contribution.  Interest begins accumulating immediately.  Withdrawal can begin within 30 days.  Payment amounts can be fixed or variable, do not change, and are based on your age and the current interest rate at the time of purchase.  Variable immediate annuities have payment amounts that vary according to the performance of the investment vehicle chosen by you.  Although these annuities have incomes that fluctuate with market trends, they are designed to keep pace with inflation to provide an increase in payment amounts over a long period. Once you invest in an immediate annuity accessing the principal amount is not easy.   Keeping some of your funds in an easily assessable savings account will ensure that you get through any small financial difficulties. Choosing an income for life option with no refund guarantee could imperil your principal.  With this option, investors who die before full distribution of their principal forfeit the principal to the insurance company, not their heirs.  Discuss all of your options with your financial advisor before purchasing your annuity. Beware of Inflation Before selecting your immediate annuity, consider the consequences of inflation.  Investments that will outpace inflation are crucial.  Variable immediate annuities historically have the best record of beating inflation by allowing you the option to participate in the stock market.  Your annuity can continue to grow even after you begin receiving payments.  There is some risk that your principal and payments can drop along with the stock market.  In the short term, this can cause apprehension.  It is very important to keep your focus on the long-term results of the stock market if you choose a variable annuity.  If you want both stability and the opportunity for growth offered by the stock market, consider dividing your investment between fixed and variable immediate annuities.  Your investments will benefit both from the growth potential of the stock market and the stable income from a fixed immediate annuity.(read entire article)
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Category : Investing / Finance

Benefits Of Immediate Annuity Including Retirement Security   By: simon cronje
Retirement Security Immediate annuities offer retirement income security.  As retirement nears, you may find it is the right time to consider an immediate annuity.  Consider transferring money accumulated in another growth fund to an immediate annuity.  You also have the option of converting your deferred annuity to an immediate annuity to begin receiving payments now. Why Should You Buy an Immediate Annuity? Immediate annuities can provide guaranteed income for life.  You may not receive enough income from Social Security or other retirement accounts.  The income generated by an annuity can add to your present or future retirement income. You decide the payment schedule for your annuity income.  Annuities come with a variety of payment options.   Whether quarterly, monthly, or annually, your insurance company has a payday to suit your needs. Taxes are due on the amount you receive as a payment, not on the entire annuity balance.  This allows your principal balance to grow free from taxes until you receive a payment. Having a secure and reliable investment will ease your fears about retirement.  Increasing longevity makes it difficult to predict your own lifespan.  Estimating the exact amount of money you will need to carry you through retirement is a challenge.  Spend too much and your income drops.  Spend too little and you may give up some of the things in life that you enjoy the most.  By providing you with a fixed and guaranteed income for life, immediate annuities can reduce some of your retirement concerns. Points to Think about before Purchasing Your Annuity Money paid in to an annuity has usually been taxed already.  The IRS allows you to contribute as much of this post-tax money to an annuity as you desire.  Invest as much pre-tax money to your other investments as the IRS allows before you pay post-tax dollars to your annuity.  An annuity may be used to fund an IRA, SEP, 401(k), and 403(b); however, there are limits to the amount you can contribute.  Federal tax laws require you to begin taking distributions by April 1st of the year following the date you turn 70 ｽ.  If you fail to meet this deadline, the IRS will impose a 50% tax penalty of the amount of the shortfall. Expenses and fees differ among Annuities and their issuing companies.  Compare several contracts to find the best deal.  Morningstar and Lipper Analytical Service regularly publish fee comparisons between companies.  Remember that high expenses can counteract any gains in your investment. Interest income from annuities is classed as normal taxable income.  *Capital gains tax rates are sometimes lower than an investor痴 normal income tax bracket.  If you find yourself in a higher income tax bracket, you may actually pay more taxes on your annuity income than if you paid capital gains taxes on another investment; however, annuity balances still have the benefit of tax deferment.  Other investments might subject you to both capital gains and ordinary income taxes.  This can happen even when you have not cashed out your investments.  Consultation with your tax professional can answer any questions about your own taxable income. *Income tax laws and regulations are subject to change. (read entire article)
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Category : Investing / Finance

Several Ways To Receive Income From Annuity    Submitted as: Income Options with Guarantees How w
Have you finished researching all of your options? Investing money is one of the most important decisions you will ever make. Choosing a company stable enough to outlast both you and your investment is vital.(read entire article)
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Category : Investing / Finance

An Overview Of Annuities And Benefits Of Investors   By: simon cronje
Life insurance pays a death benefit to your survivors upon your death. Annuities pay income for life. While annuities can include a death benefit, it does not work quite the same way as a life insurance policy. Death benefits with annuities are valid only during the accumulation phase. Once this phase ends, the death benefit expires.(read entire article)
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Category : Investing / Finance

Simon Cronje    Submitted as: Annuities are investments for retirement. Two wor
These contracts offer fixed interest rates with an added bonus of gains or losses according to how the stock market performs.(read entire article)
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Category : Investing / Finance

Lifetime Annuity & Fixed Annuity - Financial Security After Retirement   By: simon cronje
Annuities and life insurance policies both have death benefits. The similarities end there. Generally, upon the owner's death an annuity will pay out an amount equal to the current value of the account or the amount of money actually paid in.(read entire article)
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Category : Investing / Finance