Indexed Fixed Annuities take the investment and buy into an index growth such as the S&P 500. If the market goes up, your investment grows, but when the market dives, your money is 100% protected. It has the same safety level as a CD. That grows tax deferred and is only taxable upon the payouts. If the investment has previously been taxed, the growth will be taxable as it is paid out. If the annuity comes from a 401K or other tax deferred instrument, the entire amount is taxable each year up to the amount withdrawn or paid out. Uncle Sam has to get his due.
J.D. Rockefeller was asked once to give one principle about growing one’s nest egg. He said, “Never pay taxes on money you don’t use.”
For seniors on a fixed income, you can’t create your life’s work and nest egg again. You need stability and safety. Fixed annuities are safe investments that give moderate growth and 100% safety to your investment. Be sure and choose an annuity insurance company with stable ratings with Standard & Poors and A.M. Best.
With CD’s, you have to pay taxes on its growth every year. Not so with annuities. I prefer Index Annuities over straight fixed annuities because you have the potential for higher growth in the stock market, but also, your money is protected when the market goes down. You don’t lose a penny when that happens! When the market rebounds, your account starts growing again. If you can allow the annuity to grow until you are at least 59 ½, you will not be taxed for early distribution.
Some annuities can give immediate returns such as immediate annuities and with some annuities, you have to wait a year before drawing money out. A typical free withdrawal percentage might be 10% a year, though if you don’t draw on it one year, you may take 20% the next year.
Index annuities are wonderful also for creating guaranteed income that cannot be exhausted during your lifetime. You decide when to trigger the income rider. If it has a guaranteed roll-up of 7 or 8% in the cash accumulation marker each year it’s deferred, that number grows each year you wait to begin the distribution phase. This number is used to determine guaranteed payouts. From the beginning illustration, you can know what the payout will be, once you turn on the guaranteed payout rider.
Some of the companies I broker with include One America, North American, American Equity, Athene, Mutual of Omaha, and others. There are a variety of choices and advantages within each indexed annuity. These insurance companies must maintain strict reserve requirements from the Federal government which are much higher than banks, therefore annuities are considered safe places for principal protection and solid returns.
In the stock market crash of 1929, most insurance companies survived whereas most banks failed. With the stock market at an all-time high, it may be a good time to hedge against a market downturn. In the last 14 years, there have been 2 major downturns in the market. For example, the Japanese Nikkei exchange dropped 73% from Dec. 29, 1989 to March 9, 2009. It is true that hindsight is always 20/20, but as a senior, can you afford to lose your lifetime savings from a severe stock market downturn?
Indexed annuities are the best investment I know of which give solid growth in a rising stock market and total protection when the market does a reversal or correction.
If you want a fixed annuity with guaranteed multi-year interest, I can offer attractive rates (i.e., over 3%) with good solid companies as well. Multi-year guaranteed interest annuities are good in that you will know exactly what you are getting each year. They may be easier to understand.
Call Blaine Grow for an appointment to offer you a personalized strategy to protect and grow your savings and investments.