Key Takeaways:

Annuities Advisor – Richmond VA

Daily Living

Annuities are a staple of any well-rounded investment portfolio, especially later in one’s life. If you have been looking for ways to reduce your risk, and engender a predictable stream of revenue, then you may be interested in learning more about annuities. Annuities are designed to limit your risk, and provide you with a high level of stability. Usually, when you reduce the risk of your investment, you also reduce the amount of potential profit, but with annuities you gain peace of mind. There are so many types of annuities, with so many different terms and conditions, that anyone would be correct in stating that it is somewhat, or [often] even very confusing. Fixed income annuities can be more straight-forward, and are often a great option for investors age 60 and over, and those desiring a predictable source of revenue, especially during retirement. However, we have been able to obtain coverage for individuals at 85+ years of age, though it almost exclusively takes the form of whole or universal life contract. No matter your age, it’s probably good to explore all the options available.

Understanding Annuities

Most annuities are a type of insurance contract which carry a measure of risk, some are inherently riskier than others. Additionally, there are many hybrid options, within the fixed income space, including plans which feature long-term care benefits, life insurance benefits, and interest rate guarantees. The most important component of any financial instrument is that you understand what it can do, what it cannot do, and what the associated risks are. Don't be afraid to ask questions, and thoroughly investigate every aspect of your policy and portfolio. You have the right, as the investor, to be treated with the utmost respect, but also to participate in something you want, need and understand.

With the help of your financial, legal and accounting advisors, it is always important to make certain that your annuity is being underwritten by a highly rated insurance company. Your advising broker should never suggest a company that is not well respected, and highly rated. Market volatility can still be a huge concern for variable and indexed annuity contracts, so you will want to discuss in detail all the risks associated with your new or existing policy. Fortunately, with a fixed interest plan, sometimes referred to as "Fixed Income", annuities may allow you considerably more freedom to enjoy your returns, without as much anxiety about which way the market winds are blowing.

Annuities – Investing & Taxes

For most long-term investment, any withdrawal before 59 years and 6 months of age will likely be subject to a 10% tax penalty in addition to regular income tax. There are additional schedules for each product that may cause additional fines and fees if the insurance product is not used in the way it was contracted and intended.

Sometimes the existing policy value in a Life Insurance Contract, or an annuity contract that may no longer represent your current needs, can be used to fund a new annuity. This is usually done in the form of a "1035 Exchange". A 1035 Exchange does not create permanent income tax exclusion on gains, rather the basis of the surrendered contract is carried to the new contract as the basis. There are strict IRS guidelines that regulate this type of exchange, but with proper guidance, and attention to detail, it can be done to great benefit. Navigating these important details is why you should work with advisors, brokers and planners that have a track record of proven success and whom are well respected. One of the biggest transactional costs that often comes into play for any annuity exchange is the “surrender charge”. For many companies, surrender charges eventually expire with an existing contract after a certain period of time. However, a new contract could increase these charges and could even increase the period of time in which the surrender charges apply. Creating a detailed CBA (Cost Benefit Analysis) of how the surrender provisions will affect your investment is critical.

Annuity – Risks & Benefits

There is always some measure of uncertainty in every kind of annuity, as there is in every financial instrument. Charitable annuities, variable annuities, deferred annuities, and several kinds of hybrid annuity programs, along with fixed income annuities, all carry varying degree of risks and rewards. Any new annuity policy will have fees and surcharges, and your old policy may have surrender charges, there are many things to consider before determining whether or not this will benefit you, and the timing is very important.

Contact Us

If you have any queries, let us know and we will get back to you.
We'll never share your email with anyone else.
Top Arrow Icon