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The annuity is the only investment that can
guarantee you payments for the rest of your life!
Think of your money as
irreplaceable at this stage in your life. If you lose
it, it is gone forever. Therefore, you should treat your
money just like you would treat your very pretty teenage
daughter - whenever it's going out of your sight you
want to know who it's going with, what it's going to be
doing and when it's coming home.
History
of The Annuity
While annuities have become extraordinarily popular in modern times,
they are not
new. In
fact, the annuity can actually trace its origins back to Roman times.
Contracts
during the Emperor's time were known as annua, or "annual
stipends" in Latin. Back then, Roman citizens would make a
one-time payment to the annua, in exchange for lifetime
payments made once a year. That payment arrangement closely
resembles today's immediate annuity offered by insurance
companies.
The annuity
made its first mark in America during the 18th century. In 1759, a
company in Pennsylvania was formed to benefit Presbyterian ministers
and their families. Ministers would contribute to the fund, in
exchange for lifetime payments.
Nowadays,
annuity contracts are issued by life insurance companies. Because
of the preferential tax treatment afforded the life insurance
companies, the annuity contract offers the purchaser a tax-deferred
savings vehicle.
Who owns annuities?
A 2005 Gallup Survey of Owners of Annuity Contracts reports that the
Americans who have chosen this retirement savings option have moderate
incomes (66% have annual household incomes below $75,000). There
are slightly more women than men (56% vs. 44%), and most are retired
(58%). Although their average age is 66, the average age at which
owners purchased their first annuity was 50.
Why do Americans own annuities?
According to the same Gallup Survey, annuities are seen as a way to
provide their owners with additional retirement income (78%) and as a financial
safety net in case they or their spouse live well beyond
their life expectancy (83%).
What do owners think about the importance
of tax deferral to savings for retirement?
Most non-qualified annuity owners believe they have done a very good
job of saving for retirement (87%). Nine in ten non-qualified
annuity owners agree that the current tax treatment of annuities encourages
long-term savings (91%), and that annuities are an effective way
to save for retirement (90%).
Fixed
Annuity versus Variable Annuity
There are two basic annuity categories ... fixed annuity ... variable
annuity.
BenefitsLab expertise is with the fixed annuity,
i.e. Immediate Annuity, Deferred Annuity and Indexed Annuity. We prefer to leave the variable
annuities to the investment brokers and leave it up to them to make the
comparisons and guessing as to which ones will outperform the others.
There are considerations for having the
immediate annuity
in a retirement portfolio.
A Word or Two of Caution
Take the
time to learn what you are buying. Informed buyers are happy buyers. There has been some recent confusion
surrounding annuities which has been mostly attributable to the
Equity Indexed Annuity (EIA)
. These are sophisticated annuity contracts
and require the advice of an expert. Until recently, it has been difficult for the buyer to accurately
compare multiple plans offered by multiple insurance companies. We now have the software
to make those EIA comparisons.
Want
More Info? ... Russ Swallow ... 508-831-0805
(or
use e-mail address below)
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