A Fixed Annuity is a contract that lets you invest your money; and in return, will pay you a fixed, stated rate of return. The interest rate is guaranteed for a certain period of time, such as a year, and then the rate will change, based on current market conditions. You will be notified of what your new rate will be and then that rate is locked in for another period of time, for example, another year.
There’s also a “minimum” guarantee rate so you know that your money will always earn a certain amount no matter how low interest rates fall.
While your money is in the annuity that rate of return grows tax-deferred, meaning you will not pay any taxes on the growth of your money until you decide to make a withdrawal. So, you won’t receive a Form 1099 at the end of the tax year. Because you’re not paying any taxes on those earnings…your money actually grows faster because the money that would have gone to the IRS gets to stay in the annuity and continue to compound.
Fixed Annuities Are Great for People Who:
ACCESSING YOUR MONEY
Emergencies do arise, and access to your money is always an important concern. Fixed Annuities offer a variety of liquidity features. For additional withdrawals prior to the end of the surrender charge period, surrender charges may apply. Withdrawals will be treated as ordinary income and if taken prior to age 591/2 may be subject to a 10% IRS penalty. Withdrawals from your contract will also reduce your accumulation value accordingly.
*Withdrawals are also referred to as partial surrenders.
ANNUITY PAYOUT OPTIONS
Should you decide to receive an income from your annuity after the surrender charge period, you will have several
annuity payout options from which to choose. Annuity payout options are a benefit of deferred annuities, but are
not a requirement. With non-qualified plans, a portion of each income payout represents a return of premium that is not taxable, thus reducing your tax liabilities.
The following options are typically available:
• Income for a Specified Period
• Income for a Specified Amount
• Life Income with a Period Certain
• Life Income
• Joint and Survivor Life Income
Typically, fixed annuities will allow you to take a penalty-free withdrawal also known as a penalty-free partial surrender) equal to the interest earned each year after the first contract year, without incurring any surrender charges or interest adjustments. Any amount withdrawn in excess of interest earned will be assessed a surrender charge and possibly an interest adjustment. Surrender charges and interest adjustments on IRS Required Minimum Distributions exceeding the penalty-free withdrawal amount will be waived by many different isurance companies current practices.
NURSING HOME CONFINEMENT RIDERS
These riders typically allow the annuitant to increase the penalty-free withdrawal amount by 10% should the annuitant become confined to a qualified nursing home facility for at least 90 consecutive days and after the first contract anniversary. Some carriers offer this benefit free of charge and automatically include the benefit if the annuitant is less then a certain age - seventy five for example. This rider's availability varies by state. Certain carriers may limit the benefit to only the first annuitant in case joint annuitants are named on the contract. Please consult with your Aspire Representative concerning this rider, if it is offered, and how it may be effected by your particular contract.
Surrender charges allow the insurance company to invest your money on a long-term basis and credit higher yields than possible with a similar annuity of shorter term. A surrender charge is assessed on any amount withdrawn, whether as a partial or full surrender, that exceeds the penalty-free amount applicable. However, surrender charges on any portion of an IRS-Required Minimum Distribution exceeding the 10% penalty-free amount are waived by many insurance companies current practices. There are tables detailing the declining charges by the option chosen in the product brochures and should be carefully looked over so you have a good understanding of the plan before deciding if that plan is appropriate for you. Additional premiums deposited into existing contracts will maintain the surrender charge schedule set forth by the initial premium. Certain payout options may incur a surrender charge. Note: Please keep in mind that a surrender during the surrender charge period could result in a loss of premium. Surrender charge structure may vary by state. Consult your Annuity Disclosure Statement for details specific to your state.
At the end of each selected Guarantee Period, you may choose to renew your fixed annuity for another guaranteed interest rate period. Depending on your circumstances and financial goals, you will typically have a 30 day window to select a guarantee period from those available, elect a payout option, or withdraw your accumulation value. If no election is made, the Company will automatically renew your annuity for the same guarantee period. Within this 30 day window, no surrender charges or Interest Adjustment will apply. After the 30 day window, a new guarantee period, guarantee period interest rate, surrender charge period and interest adjustment will be applied. Renewal rates for subsequent guarantee periods may differ from the initial guaranteed interest rate.
OK - LET'S RECAP ...
Fixed Annuities Are Great for People Who:
There are many options available when considering a Fixed Annuity as part of your retirement strategy. Each should be considered carefully. Your Aspire Financial Group Professional can show you more specifically how a Fixed Annuity may be suitable for you.
1. Aspire Financial Group, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this web site is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances.
2. Guarantees apply to certain insurance and annuity products and are subject to the insurer's claims-paying ability and financial strength.
3. This page is designed to be for your general information and does not purport to completely cover all features, benefits and aspects of any particular financial product. Features and benefits discussed are typical of fixed annuities in general but may difer by insurance company and product. You should always carefully consider the features and benefits of each particular financial product and consult with a financial professional before purchasing.
Steven J. Podgorski, LUTCF d.b.a. Aspire Financial Group, 1720 Crofton Drive, Algonquin, IL 60102