Guaranteed Income
Unlike life insurance, annuities are designed to specifically provide living benefits. Like life insurance, annuities provide guaranteed and stable payouts and do also provide a death benefit in the case the annuitant/policy owner is to pass prior to the payout/annuitization period.
Annuities operate on a pay for capital basis of which allows you to accumulate funds on a tax-deferred basis (accumulation period), with a guaranteed rate of return and no investment risk for loss. During payout/annuitization period, these policies provide a guaranteed and consistent source of income payable for life or for a specified period selectable by the policy owner.
Allow Piedra Insurance Concepts to guide you through the features, benefits and drawbacks of an annuity product to identify a solution that works for you and your family.
Indexed Annuities
A form of fixed annuity EXCEPT that interest is credited to the contract is NOT declared in advance by insurance company, rather, it is based on the performance of an independent market index - Such as the S&P 500.
Like a traditional fixed annuity - Indexed annuities provide for a minimum guaranteed interest rate however usually at a lower rate that an traditional fixed annuity and at times for only a portion of invested premiums (such as 80%-90%).
At the end of a specified interest crediting term, either the indexed interest or the minimum guaranteed rate is credited toward the contract, whichever is greater.
Annuity Planning
Clear Advantages
However, annuity owners have much flexibility as to when and how funds are drawn either through withdrawals or annuitizing the contract.
Annuities are unique financial investment contracts. Of which provide annuity specific benefits over other financial vehicles:
- Provides a guaranteed and consistent income during the annuitization phase on a per period, per amount or lifetime income basis.
- No medical underwriting required (unless your select an annuity with a Long-Term Care Rider)
- Owner has flexibility depending on the type of annuity chosen as to when and how funds can be paid out - Withdrawal or Annuitization
- Principal (premiums incurred, minus expenses) is not taxable income upon withdrawal or annuitization payouts.
- Accumulations are tax deferred.
- Annuity interest earnings are subject to taxation as funds are dispersed through annuitization period or through withdrawal.
- Withdrawals prior to reaching age 59.5 is subject to a 10% penalty on earnings - Annuitization is NOT.
- Annuities provide guaranteed death benefit in the case the annuitant passes prior to annuitization.
- Annuities are contracts. As such, they are not subject to probate or to estate administration when the owner dies.
Needs Based Analysis
Piedra Insurance Concepts is your trusted advisor to help right-size your policy based on your personal circumstances and needs. We strive to structure an annuity investment vehicle that best fits into your overall long-term income strategy. As always, we are client centric focused on answering key client focused questions such as:
- When do I expect to access the contract funds?
- How long will my money be tied up?
- Am I fully funding any retirement plan to which my employer contributes?
- What is my tax bracket now and what do I expect it will be when I retire?
- Will this product meet my objectives for my dependents/beneficiaries/heirs?
- Do I fully understand the benefits this product will provide me and the limitations or risks it poses for me?
- What are my expectations for this product?
- How comfortable am I with the control I have (or don’t have) over the investment of funds in this product?