Annuities are not new forms of investment as one thinks generally. Do you know that it dates back to the Roman Period, where People used to make a one-time payment known as the Annua and in return for this payment; they were guaranteed to get their payments back over the period of their lives. Annuities are good for anyone who wishes to retire comfortably and to make most of their long-term savings. An annuity is a contract with an insurance company for a guaranteed interest carrying policy with secured income to the annuity holder. In the U.S., only insurance companies are allowed to sell annuity contracts and thus it is called as Annuity Insurance.
One should take a proper decision before they touch the retirement age and it is very well necessary for all of us to know all about securing the later stage of our life. We know that annuities offer regular monthly income to the investors but can annuity insurance meet ones immediate financial needs Yes, it can if one opts for immediate annuity insurance. If one has urgent financial requirements or an emergency, an annuity other than annuity immediate, is bound to take too long to get payments. An annuity immediate offers the opportunity to receive income right away, which no other retirement plans, can match. In immediate annuity, one can arrange to receive regular income either monthly, quarterly, semi-annually or annually. This article will enlighten you about the basics of annuity immediate and how you can make it part of your financial plan.
Understanding Annuity Immediate: Annuity insurance is considered to be a great financial instrument for people who are interested in securing their future and in long-term growth. There exists several types of annuities and each annuity has two basic properties like whether the returns are fixed or variable and whether the payout is immediate or deferred. To put it simply, an immediate annuity is nothing but an investment policy that is usually bought on a single premium basis and payments either begin immediately or within one year from the date of purchase of the annuity. That is why; they are also known as single premium Annuity Immediate. Immediate annuities are bought in lump sum and are very commonly used as retirement investments, since it supplies regular income during the lifetime or for a particular time period, as chosen by the annuity holder. Different varieties of options are available to you, when you decide to buy annuity immediate. One has to decide between whether they would like to receive payments for their lifetime or for a specified period. You would also need to decide whether your monthly payments are only for you, as an annuity holder or also for a dependent person, such as your spouse. Annuity immediate allows you to convert lump sum of money to an investment in annuities, whereby; payments usually begin about a month after your purchase of such annuities. An annuity immediate can be purchased with funds obtained from a variety of sources, like funds from an IRA account, from inheritance, or a maturing certificate of deposit or proceeds from the sale of a house, etc. In the case of annuity immediate, the word Qualified implies the tax status of the source of funds, used for the purchase of annuities. These qualified annuities come from company sponsored retirement plans or individual retirement funds.Since income taxes are not paid on these funds, the payments received from such qualified annuities, are fully taxable as income. In the case of non-qualified annuities immediate, one has got to pay taxes only on that portion of the annuity immediate payments, which is considered as earnings. One is not taxed on the portion of payments, which is principal. The principal amount is nothing but the deposit amount, you initially made with funds, which has already been taxed.
Forms of Annuity Immediate: Annuity immediate offers a variety of income options like lifetime, period certain, joint and survivor. One may always select either a single life pension or a joint life pension. As the name suggests, a single life pension is nothing but that annuity income will be paid to you for your lifetime and which will be stopped upon your death. Whereas, a joint life pension is where the income is paid for the whole of your life, and also upon your death, a second pension is paid to your dependents till their lifetime. Straight life annuity is the simplest form of annuity, which guarantees payments for the lifetime of one person and the payments are also greater than those obtained from other types of annuity immediate. In the case of other forms of annuity, the insurer has to calculate the risk of a longer period than the life expectancy of one single person, and so, the monthly payments are also reduced. Lets take the case of period certain annuity immediate. Period certain is nothing but a fixed period of time specified by the annuity holder. If one opts for a 5 year Period certain annuity immediate, without life contingency, level payments are received for a period of five years and if the annuitant dies before the end of that period, the balance payments will be paid to the appointed beneficiary.If the annuitant is alive, then no payments are made after the end of the stipulated period, which can be 5, 10, 15 or 20 years period certain. In Joint and Survivor annuities, full payments are provided as long as the annuity holder and the joint annuitant are alive and upon the death of any one person, either the annuitant or the joint annuitant, the payments are reduced by 50 to 75%, and will be provided to the survivor as long as he or she is alive. One can add a period certain provision to these types of annuities, so that, if the annuitant or the joint annuitant dies before the specified period, the survivor will continue to receive the full amount, and not the reduced payments before the end of the stipulated period. If both of them die, full level payments shall be paid to the appointed beneficiary, till the end of the specified period.
Fixed Annuity Immediate: Though, generally annuities are designed to give support and value to our retirement plans, immediate annuities are designed to give income immediately after retirement. Annuity immediate can have fixed or variable payout options. A fixed annuity immediate is a contract between the annuitant and the Insurance Company, which are usually bought in lump sum premium, so that, monthly income payments are received as long as he or she is alive. Income derived from such fixed annuities will never change and it is for conservative people, who emphasize on security. It guarantees a reliable and steady stream of income for your life time but one inherent problem in such annuities is that it is exposed to the problem of inflation, that is, cost of living will most certainly increase over your lifetime, whereas, the monthly payment you receive will not. Fixed income annuity immediate payments are based on factors like your contribution, age, sex and the rate of interest at the time of the purchase of the annuity. It is for those who opt for security and stability and proves to be an excellent budgeting tool because in a fixed immediate annuity one is guaranteed of a certain return.
Variable annuity Immediate: annuity immediate variable payments will vary depending grossly on the performance of the underlying investments and you bear the market risk in such cases. Here, a lump sum premium amount is converted in to stream of income and assists one in diversifying their assets and accomplish your goals. As we know that, the income payments are not guaranteed, the returns will fluctuate from month to month. Though, Variable immediate annuities are for the risk takers, one can also try to maximize the growth opportunities of bonds and stocks. It can help one to meet a particular financial need due to its numerous investment options and by providing income immediately. Points to be considered A good advantage of annuity immediate is that if you purchase your policy privately or with non-qualified funds, then a reasonably large percentage of monthly income is tax-free since the payout is assumed to be a return of capital, by the government. Only that portion, which is considered as earnings, is subject to taxes. Now, lets look in to the other side of such annuities. Once you bought an annuity, it cannot be changed. It is indeed the biggest and permanent financial decision of your life. Yes, an annuity purchase is absolutely irrevocable and non-refundable. Just for this reason, one has to be more careful and it is advisable, to consult an independent financial advisor, who will guide you in your purchase of annuity immediate. Another major disadvantage of annuity immediate is that, if one chooses life only payout option, where they receive income for their lifetime and if he or she dies within a month of the contract, nothing is paid to the heirs.
The Insurance Company gets to keep all your money. Even if you outlive the contract, nothing can be passed on to your heirs. Have you ever wondered at the reason for why only very few opt to convert their IRAs, or 401(k)s or private brokerage accounts to annuity investments, when they retire. Its because, people when asked to consider About annuities, associate it with variable annuities, which they are wary of due to the reason that payments from such annuities fluctuate based on the market conditions. But that is not the case with fixed annuity immediate. To put it in its simplest form, a fixed immediate annuity is an instrument designed to produce stable income, that is, you are guaranteed a specified amount of annual income all throughout your life, no matter, how long that is going to be. When you look at the brighter side of immediate annuities, then one can opt for variety of income options like lifetime, period certain or joint pension. If you go for, fixed immediate annuities, it will provide you with lifelong steady income and income payments also can be either deferred for a year or can start as soon as 30 days from the date of purchase of annuity immediate. An immediate annuity will provide you with a way to supplement your current income. If you are on the verge of retirement, you can always transfer your accounts into immediate annuity, so that, you can immediately receive income. If you are convinced about immediate annuities, do a thorough homework and also check on several websites that will offer you free quality information and quotes for your convenience!
One should take a proper decision before they touch the retirement age and it is very well necessary for all of us to know all about securing the later stage of our life. We know that annuities offer regular monthly income to the investors but can annuity insurance meet ones immediate financial needs Yes, it can if one opts for immediate annuity insurance. If one has urgent financial requirements or an emergency, an annuity other than annuity immediate, is bound to take too long to get payments. An annuity immediate offers the opportunity to receive income right away, which no other retirement plans, can match. In immediate annuity, one can arrange to receive regular income either monthly, quarterly, semi-annually or annually. This article will enlighten you about the basics of annuity immediate and how you can make it part of your financial plan.
Understanding Annuity Immediate: Annuity insurance is considered to be a great financial instrument for people who are interested in securing their future and in long-term growth. There exists several types of annuities and each annuity has two basic properties like whether the returns are fixed or variable and whether the payout is immediate or deferred. To put it simply, an immediate annuity is nothing but an investment policy that is usually bought on a single premium basis and payments either begin immediately or within one year from the date of purchase of the annuity. That is why; they are also known as single premium Annuity Immediate. Immediate annuities are bought in lump sum and are very commonly used as retirement investments, since it supplies regular income during the lifetime or for a particular time period, as chosen by the annuity holder. Different varieties of options are available to you, when you decide to buy annuity immediate. One has to decide between whether they would like to receive payments for their lifetime or for a specified period. You would also need to decide whether your monthly payments are only for you, as an annuity holder or also for a dependent person, such as your spouse. Annuity immediate allows you to convert lump sum of money to an investment in annuities, whereby; payments usually begin about a month after your purchase of such annuities. An annuity immediate can be purchased with funds obtained from a variety of sources, like funds from an IRA account, from inheritance, or a maturing certificate of deposit or proceeds from the sale of a house, etc. In the case of annuity immediate, the word Qualified implies the tax status of the source of funds, used for the purchase of annuities. These qualified annuities come from company sponsored retirement plans or individual retirement funds.Since income taxes are not paid on these funds, the payments received from such qualified annuities, are fully taxable as income. In the case of non-qualified annuities immediate, one has got to pay taxes only on that portion of the annuity immediate payments, which is considered as earnings. One is not taxed on the portion of payments, which is principal. The principal amount is nothing but the deposit amount, you initially made with funds, which has already been taxed.
Forms of Annuity Immediate: Annuity immediate offers a variety of income options like lifetime, period certain, joint and survivor. One may always select either a single life pension or a joint life pension. As the name suggests, a single life pension is nothing but that annuity income will be paid to you for your lifetime and which will be stopped upon your death. Whereas, a joint life pension is where the income is paid for the whole of your life, and also upon your death, a second pension is paid to your dependents till their lifetime. Straight life annuity is the simplest form of annuity, which guarantees payments for the lifetime of one person and the payments are also greater than those obtained from other types of annuity immediate. In the case of other forms of annuity, the insurer has to calculate the risk of a longer period than the life expectancy of one single person, and so, the monthly payments are also reduced. Lets take the case of period certain annuity immediate. Period certain is nothing but a fixed period of time specified by the annuity holder. If one opts for a 5 year Period certain annuity immediate, without life contingency, level payments are received for a period of five years and if the annuitant dies before the end of that period, the balance payments will be paid to the appointed beneficiary.If the annuitant is alive, then no payments are made after the end of the stipulated period, which can be 5, 10, 15 or 20 years period certain. In Joint and Survivor annuities, full payments are provided as long as the annuity holder and the joint annuitant are alive and upon the death of any one person, either the annuitant or the joint annuitant, the payments are reduced by 50 to 75%, and will be provided to the survivor as long as he or she is alive. One can add a period certain provision to these types of annuities, so that, if the annuitant or the joint annuitant dies before the specified period, the survivor will continue to receive the full amount, and not the reduced payments before the end of the stipulated period. If both of them die, full level payments shall be paid to the appointed beneficiary, till the end of the specified period.
Fixed Annuity Immediate: Though, generally annuities are designed to give support and value to our retirement plans, immediate annuities are designed to give income immediately after retirement. Annuity immediate can have fixed or variable payout options. A fixed annuity immediate is a contract between the annuitant and the Insurance Company, which are usually bought in lump sum premium, so that, monthly income payments are received as long as he or she is alive. Income derived from such fixed annuities will never change and it is for conservative people, who emphasize on security. It guarantees a reliable and steady stream of income for your life time but one inherent problem in such annuities is that it is exposed to the problem of inflation, that is, cost of living will most certainly increase over your lifetime, whereas, the monthly payment you receive will not. Fixed income annuity immediate payments are based on factors like your contribution, age, sex and the rate of interest at the time of the purchase of the annuity. It is for those who opt for security and stability and proves to be an excellent budgeting tool because in a fixed immediate annuity one is guaranteed of a certain return.
Variable annuity Immediate: annuity immediate variable payments will vary depending grossly on the performance of the underlying investments and you bear the market risk in such cases. Here, a lump sum premium amount is converted in to stream of income and assists one in diversifying their assets and accomplish your goals. As we know that, the income payments are not guaranteed, the returns will fluctuate from month to month. Though, Variable immediate annuities are for the risk takers, one can also try to maximize the growth opportunities of bonds and stocks. It can help one to meet a particular financial need due to its numerous investment options and by providing income immediately. Points to be considered A good advantage of annuity immediate is that if you purchase your policy privately or with non-qualified funds, then a reasonably large percentage of monthly income is tax-free since the payout is assumed to be a return of capital, by the government. Only that portion, which is considered as earnings, is subject to taxes. Now, lets look in to the other side of such annuities. Once you bought an annuity, it cannot be changed. It is indeed the biggest and permanent financial decision of your life. Yes, an annuity purchase is absolutely irrevocable and non-refundable. Just for this reason, one has to be more careful and it is advisable, to consult an independent financial advisor, who will guide you in your purchase of annuity immediate. Another major disadvantage of annuity immediate is that, if one chooses life only payout option, where they receive income for their lifetime and if he or she dies within a month of the contract, nothing is paid to the heirs.
The Insurance Company gets to keep all your money. Even if you outlive the contract, nothing can be passed on to your heirs. Have you ever wondered at the reason for why only very few opt to convert their IRAs, or 401(k)s or private brokerage accounts to annuity investments, when they retire. Its because, people when asked to consider About annuities, associate it with variable annuities, which they are wary of due to the reason that payments from such annuities fluctuate based on the market conditions. But that is not the case with fixed annuity immediate. To put it in its simplest form, a fixed immediate annuity is an instrument designed to produce stable income, that is, you are guaranteed a specified amount of annual income all throughout your life, no matter, how long that is going to be. When you look at the brighter side of immediate annuities, then one can opt for variety of income options like lifetime, period certain or joint pension. If you go for, fixed immediate annuities, it will provide you with lifelong steady income and income payments also can be either deferred for a year or can start as soon as 30 days from the date of purchase of annuity immediate. An immediate annuity will provide you with a way to supplement your current income. If you are on the verge of retirement, you can always transfer your accounts into immediate annuity, so that, you can immediately receive income. If you are convinced about immediate annuities, do a thorough homework and also check on several websites that will offer you free quality information and quotes for your convenience!
