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INVESTING:
Annuities
Annuities - Are They Missing From Your Portfolio?Your portfolio may consist of a good mix of stocks, bonds, mutual funds perhaps real estate and hopefully life insurance and of course they all serve their purposes well. But which of these can provide a guaranteed income stream for retirement to supplement pension and /or social security? Annuities are solid retirement investment vehicles offered by insurance companies with certain guarantees that other investment vehicles simply do not offer. Where life insurance protects dependents from someone dying to soon annuities protect the individual from outliving their resources. Annuities are not as complicated as they may seem. As a retirement vehicle they invest funds on a fully guaranteed basis or they invest to experience potentially higher growth through the performance of the stock market. Make your choice but with the advice of a financial professional. The IRS provides motivation for you to invest in an annuity. Whichever way you choose for them to grow over the years you need to remember that they do grow tax deferred. That means that the money you would have paid on income taxes that year is instead invested toward your retirement.that same year. Even though income tax is inevitable, you pay those taxes in your retirement years at a lower tax rate than you would have in your working years. Other investment vehicles are taxable the year they are earned while annuities compound not only interest on investment but tax money as well; very powerful. Annuities are basically divided into 2 time periods; the accumulation or funding period where deposits are made over time and the annuitization or liquidation period where the retiree can choose from a number of methods to create an income stream for those golden years. During the accumulation period funds can be deposited on a lump sum basis or periodically. In most cases the money invested can be guaranteed to the retiree regardless of performance and contrary to popular opinion, the investor does have access to their money, usually up to 10% of contract value though some companies differ. You must remember that withdrawals prior to age 59 ½ may be subject to a 10% penalty and surrender charges so the IRS and the insurance company are motivating you to keep the funds invested long enough to produce. Are annuities expensive? If you look at tax deferred investing, lifetime guaranteed income stream and death benefit protection perhaps you may come to the conclusion that they are not expensive at all. They are often used to fund an IRA even though the tax deferred aspect is repeated in the IRA, a retirement tax shelter provided by the IRS for free. The annuitization period has finally arrived and the time for choosing the income stream you desire. Although there are a few options, the two most popular will produce guaranteed income for the life of the recipient, even if the funds are exhausted. The other option covers two people, usually spouses, and upon the death of one spouse, income continues to be paid for the life of the survivor again, even if the funds are exhausted. There are other details within annuity contracts that a good life insurance representative or financial advisor can help you with but I believe that every investment portfolio should have a place for guaranteed life time income. Alan S. Fernandez is president of Foundation Financial Services with a BBA in Finance and Economics from Iona College, studied under the Life Underwriters Training Council and Certified Financial Planner programs and with 15 years in the insurance industry is a well known problem solver among businesses and individuals alike. He is also an insurance instructor with Citicorp. He can be contacted at afern109@optonline.net or visit the FFS website at http://www.foundationfinancialservicesny.com Article Source: http://EzineArticles.com/?expert=Alan_Fernandez |
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