Annuity FYI Blog

The Annuity News Journal’s Christi Roberts says that “Variable Annuities Could Save Social Security.”  I think there is a valid argument for this point, but can’t imagine how long of a road it would be to get the government on board.  Social Security has been in place since 1935 and changing the system would be difficult to say the least.  But the system has become flawed as more money continues to stream out than go in.  Something has to be done to correct the demise of Social Security so that our kids and their kids will receive their money in retirement.  Maybe switching the system to variable annuities will actually be the way to go.

One advantage of variable annuities is that they grow tax-deferred until a date later in the future when you need money.  They also offer stability with monthly income payments and protection in a down market.  If you are lucky enough to possess a variable annuity during a market increase, your benefits will skyrocket.  If the Social Security system started using variable annuities, growing their income tax-deferred would at the very least push the problem of running out of money farther into the future.  Best case scenario, which many people believe is a possibility, restructuring Social Security in this way could correct the problems it faces today.

Written by Rachel Summit

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In “Why consider an annuity?,” Scott Lunsford writes in the Chillicothe Gazette that there is no better time than now to purchase an annuity.  He says that while some annuities can be complicated, a fear of many people, a fixed annuity is straightforward and offers you a multitude of benefits for your retirement years.  Since you insure your house and car with an insurance company, it is a wise decision to insure some of your retirement savings with one as well.

Fixed annuity rates are currently 3.5% and are guaranteed not to go below 2%, something that can’t be matched by many other savings vehicles.  You also are typically allowed to withdraw up to 10% of your money each year without a penalty and with death benefits, you can avoid the hassle of probate court after death.

Fixed annuities are similar to bank CDs, with the exception that they are most often bought through an insurance company rather than a bank.  Annuities are different in that they are tax-deferred and offer more flexibility than bank CDs and other savings vehicles.  They also have guarantees that last over your lifetime and in some cases, your spouse’s lifetime as well.  The author believes that everyone should at least consider purchasing an annuity, especially because of the volatile stock market and very low interest rates that we are currently experiencing.

Written by Rachel Summit

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In the U.S. News & World Report article, “Do You Need an Annuity?,” Phil Taylor goes through the benefits of annuity products in retirement.  Annuities came about to ensure that retirees do not outlive their savings.  Because of their low risk, fixed annuities are a conservative investment popular with retirees because of their tax-deferral benefits, exemption from creditors, and avoidance of probate through death benefits.  Their penalty for early withdrawal is usually gone after less than ten years and there is usually no limit to the amount of contributions you can make.

The article describes how you receive monthly income payments from an insurance company in exchange for either a lump sum initial payment or several installments.  The amount you’ll be paid out is predetermined whether the amount paid in is more or less that the payout you’ll get.  The payout options are detailed as follows.  If you choose straight life, you’ll get monthly payments for as you long as you live, but nothing will be passed on to your heirs.  If you choose life with period certain, death benefits will be paid to your heirs to make up for any money you paid into the annuity that has yet to be paid back.  There is also the choice of joint life for you and a spouse or joint life with period certain where your heirs would receive death benefits just like the above mentioned annuity.

With a systematic withdrawal, your payments will be fixed and will come to you either monthly, quarterly, or yearly.  Finally, you can get a lump sum annuity payment at a date in the future.  Fixed annuities are a great option for retirees, especially those who don’t have traditional pensions or multiple sources of monthly income like Social Security.  Speak with an expert for more information and to see if an annuity will work for your retirement.

Written by Rachel Summit

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Sammons Retirement Solutions is moving forward with a new variable annuity despite many carriers steering clear of variable annuities.  Since interest rates have been low and the stock market volatile, insurers like MetLife and Prudential have lessened their variable annuity business.  Sun Life Financial, out of Canada, actually left the variable annuity business altogether.  These companies worry about hedging their living benefit guarantees with a less than ideal financial market.  But Sammons says that you just have to focus on the other benefits variable annuities have to offer, those related to tax deferral.  This information comes from Darla Mercado’s Investment News article, “Others retreat, but this carrier is charging into the VA business.”

Sammons has been a staple of the fixed annuity market in the past, but is excited to introduce their variable annuity to the industry.  A new unit of Sammons Financial Group, Sammons Retirement Solutions is also the sister company to Midland National Life Insurance Co.  Sammons’ variable annuity will have up to 80 different choices in the investment menu.  They believe that focusing on simplicity and the tax-deferral benefits of variable annuities will make them successful in this new endeavor.  By staying away from the guaranteed living benefits that are stressing out insurers, Sammons is able to keep costs low and choices high.  They have chosen to compare annuities based on their ability to defer taxes throughout the accumulation period.  This switch in focus on the benefits of variable annuities is likely to be a new trend in the marketplace.

Written by Rachel Summit

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According to “Retiring in a positive tax climate is only half the battle,” written by Christopher Scalese for The Times-Tribune, fixed and fixed indexed annuities could be great retirement vehicles for Pennsylvania residents.  They are lucky to live in a state with favorable tax codes for retirees, but Pennsylvania residents still have to find a way to maximize their retirement income.  In Pennsylvania, they have a low sales tax, Social Security benefits are not taxed on the state level, and pensions are only partially taxed.

These tax benefits are a great start, but residents still need to make the most of their retirement savings and annuity products are a good way for many people to do that.  Interest rates are very low on bank CD’s right now and although annuity rates are lower than they have been in the past, fixed annuity rates are higher than those of CD’s because they are offered by insurance companies rather than banks.  Fixed annuities are a good way to earn interest tax-deferred and keep your money safe from volatile markets.

If you are looking for some market exposure, fixed indexed annuities give you that, but they still protect your principal from any losses.  People who choose annuities are typically looking for a safe way to grow their money and ensure that it lasts through retirement.  Annuities also offer tax savings that can add to the benefits already established for Pennsylvania residents.  Every safe investment has terms that you should look into and annuities are no different.  It’s best to speak with an expert and make sure the product is right for you.

Written by Rachel Summit

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