Annuity Misconceptions – What do you really know about them?
What do you really know about annuities? You see the commercials everyday – the guy on the television looks into the camera and says – “He would never sell you an annuity because they are CONFUSING AND COULD SUBJECT YOU TO TAX PROBLEMS. ” Really?
NOT TRUE – Annuities may to be new to you but they have been around for years… and they are still the same. They all have the same structure. It is very straight forward. They are built to be a safe haven for clients. Safety comes with the time commitment. To protect the financial integrity of the insurance carrier, there is various penalties for surrender charges. Just like there is for Certificates of Deposit at the banks. Typically, the longer the commitment the greater the earnings potential that the annuity carrier can provide. So – keep it there 10 years – you get almost double the return of a 5 year annuity. Therefore – decide how long you can live with the money tied up and don’t pay any surrender charges.
Annuities don’t do what a client would like them to? Really – maybe you need to know what the expectations are for the annuity. Fixed annuities have a declared interest rate and is fully guaranteed for the entire surrender period – just like a CD at a Bank.
Indexed annuities provide interest credits based on a market index. There is usually a minimum and maximum interest credit.
Variable annuities have sub- accounts much like mutual funds. They provide protection against loss via their death benefit and they also have lifetime income rider.
Another misconception – They have high fees…. not really. With a fixed or indexed annuity – a client typically only pay a fee in the form of a surrender charge. That is not a problem if you don’t need the money – these are things to really think about before you get to investing.
Variable annuities can have more fees – a management fee – a insurance company fee and a fee to get an guaranteed lifetime income rider. Several fees…..
and last – Annuities can cause tax problems. Don’t you know that everything can cause tax problems????…..Annuities are not taxed until a withdrawl or distribution is taken… and interest can stay in the annuity tax- free.
If you have money in your 401K or IRA they those funds can be transferred into an annuity tax free.
Find out more about what annuities can do for you and your financial future. Call me today…..