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Annuities
When developing a complete financial plan, it is important
to have a diversified portfolio. Annuities are an important
investment vehicle that can help your customers achieve
their future financial goals and needs.
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What is an
Annuity?
An annuity is a contract issued by an insurance
company and generally composed of two stages: the
accumulation period, during which the contract builds a cash
value and money is added, and the payout period, when the
funds are distributed. Annuities offer tax deferral during
the accumulation phase, flexible payment options, and
guaranteed death benefits.
Types of
Annuities
Fixed
Annuity
Fixed annuities offer a guarantee of principal and
interest. Contributions earn a stated interest rate for a
specified period of time while earnings grow tax deferred.
Fixed annuities are for conservative investors.
Variable Annuity
Variable annuities offer single or flexible premiums,
a broad range of subaccounts, tax deferral on earnings, and
a death benefit. Values change according to the performance
of the selected subaccounts. Generally, variable annuities
have higher expenses than a fixed annuity. Variable
annuities are best suited for investors willing to tolerate
risk.
Equity Indexed Annuity
Equity indexed annuities present interest based on the
upward movement of an equity index, but still maintain the
minimum guaranteed interest rate feature of a traditional
fixed annuity. Equity indexed annuities are for individuals
who are moderate risk takers — they want the guarantees of a
fixed annuity while their earnings benefit on possible
market upswings.
Market Value Adjusted Annuity (MVAs)
MVAs offer fixed interest rates combined with an interest
rate adjustment factor that can cause the actual crediting
rates to increase or decrease in response to current market
conditions at the time of withdrawal. MVAs are appropriate
for individuals who are willing to tolerate minimal risk for
a higher initial credited interest rate.
Immediate Annuity
Immediate annuities have no accumulation phase. It is
purchased with a lump sum payment and income payments are
started right away. Immediate annuities are suitable for
individuals who recently received a lump sum of money and
are in need of a steady stream of income.
Key Benefits of Annuities
Tax Deferral – Earnings grow tax deferred.
Variety of investment options – Variable annuities offer
a variety of investment options for every type of investor.
Protection – Most contracts have a guaranteed death
benefit.
Flexible Contributions – With many products, money can
be added at any time.
Power of Compounding – Tax-deferral allows compounding
of earnings.
Flexible Income Options – Receive payments according to
your income needs.
Avoid probate.
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