What is an Annuity?
An annuity is a contract
in which an insurance company makes a series of income payments at regular
intervals in return for a premium or premiums you have paid. Annuities
are most often bought for future retirement income. Only an annuity can
pay an income that can be guaranteed to last as long as you live.
A deferred annuity has two
parts or periods. During the accumulation period, the money you put into
the annuity, less any applicable charges, earns interest. The earnings
grow tax-deferred as long as you leave them in the annuity. During the
second period, called the payout period, the company pays income to you
or to someone you choose.
During the accumulation
period of a fixed annuity, your money earns interest at rates set by the
insurance company or in a way stated in the annuity contract. The company
guarantees that it will pay no less than a minimum rate of interest
During the payout period, the amount of each income payment to you
is generally set when the payments start and will not change.
Equity- Indexed Annuities
This is a very popular fixed
annuity, either immediate or deferred, that earns interest or provides
benefits that are linked to an external equity reference or an equity index.
The value of the index might be tied to a stock or other equity index.
One of the most commonly used indices is Standard & Poorís 500 Composite
Stock Price Index (the S& P 500) which is an equity index.. The Equity
-Index Annuity is different because of the way it credits interest to the
annuityís value They use a formula based on changes of the index to which
the annuity is linked. The accrued interest becomes the principle which the value is maintained and never goes down, even in a stock market decline. The many formulas and features offered decide how
the additional interest you get and when itís credited to your annuity.
When credited this interest becomes principal and cannot be lost. Itís
a great vehicle for accumulation in times of market uncertainty.
Call us and find out about the latest features of fixed annuities including bonus and guaranteed returns.
Who Owns Annuities?
Who owns annuities? The 2009
Gallup Survey of Owners of Non-Qualified Annuity Contracts reports that
the Americans who have chosen this retirement savings option have moderate
incomes (64% have annual household incomes below $75,000, and 80% have
annual household incomes below $100,000). Most non-qualified annuity owners
are female (58%), and retired (69%). Although their average age is
70, the average age at which owners purchased their first annuity was 52.
Why do Americans own annuities?
According to the 2009 Gallup Survey of Owners of Non-Qualified Annuity
Contracts, annuities are seen as a way to provide their owners with additional
retirement income (76%) and as a financial safety net in case they or their
spouse live well beyond their life expectancy (83%).
What do owners think about
how important tax deferral is to saving for retirement? Most non-qualified
annuity owners believe that they have done a very good job of saving for
retirement (91%). Almost nine in ten non-qualified annuity owners
agree that keeping the current tax treatment of annuities is a good way
to encourage long-term savings (88%), and more than four in five agree
that annuities are an effective way to save for retirement (86%).