Ask The Expert
Taxes on Annuities?
It depends....if the annuity is in an IRA, taxes are the same as any asset in an IRA, taxed as removed.
If the annuity is non-Qualified (non IRA) the funds grow tax deferred until removed. This allows for a long term build up of an account without annual tax liability. Once the funds are removed, the accumulated gain is now taxable.....EXCEPT...if the funds are removed as a pre-set payment (10 years as an example) the tax deferred gain is spread out over the payment time period. This is called the "Exclusion Ratio".
As with all important decisions, always consult a licensed professional ebfore making any final decision.
How do I make a change to beneficiary on my annuity?
If you are the owner of the annuity, you are entitled to change the beneficiary anytime and to anyone you choose. As the owner yoiu control this option. In the event of your death, your named beneficiary will receive the funds immediately and without the need for probate.
What is the mortality and expense charge on my variable annuity?
All variable annuities have a mortality and expense charge. Typically it will range from a low of .40% per year on a no-loan annuity, to a high of 1.35% on broker-sold annuities. The prospectus sold with your variable annuity will contain all fees and expenses.
Is there a Market Value Adjustment in all annuities? (MVA)
No, MVA is state specific. Only 30 of the 50 states allow for the MVA to be part of the annuity contract. A Market Value Adjustment (MVA) can be attached to a deferred annuity which pays a fixed interest rate. The fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the actual crediting rates to increase or decrease in response to market conditions.
How long is the surrender period on annuities?
The length of annuity contracts can vary anywhere from one to ten years. (some contracts have no surrender penalties). Just like a bank certificate of deposit, closing an annuity account prior to the end of the surrender period can cause a penalty. Typically the surrender charge will decrease over time which means the more seasoned the contract the lesser the surrender penalty.
Does an annuity offer penalty free withdrawals?
Most annuity products allow the owner to take a portion of the account value annually without penalty during the surrender period. Typically 10% (some higher) will be available per year, but the percentage can vary from annuity contract to annuity contract. The free withdrawals are not affected by any surrender or pre-mature withdrawal penalty.
What is a bonus annuity?
Some annuity companies will entice you to purchase an annuity form them by offering a "bonus" or "loyalty" addition. The bonus can be anywhere from 2% to higher. As an example, if the bonus amount was 5% and you deposited initially $100,000 then your beginning value would be $105,000.
What are the fees on a fixed annuity?
There are no fees, charges or expenses on a fixed annuity. The interest quoted is the amount earned, nothing is subtracted from your earned interest or your accouunt avlue.
Are there any surrender charges on my annuity?
Most annuity contracts charge a fee known as a surrender charge which you could incur if you cancel the contract before a specified amount of time. The time period of possible penalties (withdrawal) can vary from contract to contract. Most surrender period are from 2-7 years, but can be longer or shorter. Most companies will allow for a percentaeg of the accumulated value to be withdrawn annually withouy penalty. Generally 10% is allowed.
Exactly what is a deferred annuity?
An annuity is a written contract between and insurance company and a human being. The contract will promise to pay specific benefits as designated in the policy. An annuity can be purchased either with a single sum or with periodic payments to help save for retirement. Earnings in a deferred annuity are not treated as taxable income until they are withdrawn. The deferral of the tax liability on the earnings (interest)can be deferred until the annuity owner ahs a use for the accumulated funds. Withdrawals may be subject to regular income tax at the time of withdrawal.
Who and What is a Beneficiary?
A beneficiary is the person or persons who is designated to receive the proceeds of a life insurance policy or an annuity upon the death of the insured. The beneficiary is named by the owner of the policy and the owner can change the beneficiary at any time.
What is a fixed deferred annuity?
In a fixed deferred annuity the owner knows what the current and guaranteed interest rates are and when the interest will be credited to the annuity. Rates are usually guaranteed for a specified time period but many annuities have a guaranteed interest rate for the specified term of the annuity. Some fixed deferred annuities will offer different interest rates annually. The funds in a fixed deferred annuity are never at risk.
What is a variable deferred annuity?
An annuity under which the policy's premium is invested in a variety of investment divisions and the accumulated value fluctuates with the performance of the investment divisions. The accumulated value in a variable annuity is NOT guaranteed and can increase and decrease based on market conditions. If you are considering a variable annuity, ask for and read the investment prospectus.
Annuity.Com, When was it founded?
Annuity.com has been in business since July 24, 1995.
We are a National Group of licensed annuity agents banded together to help people obtain and enjoy the benefits of annuities.
Click on "Find an Agent" on the home page to locate an agent close to you.
When would a deferred annuity not be suitable for me?
Several points should be considered before considering an annuity.
• Complete a financial statement and determine your liquidity.
• What is your overall financial health?
• How much retirement income do you currently have or will have.
• What exactly do you want the annuity to accomplish?
• After you were to buy an annuity, how much liquid cash would be available to you?
• Are you buying the annuity for income? For tax deferral?
Suitability is essential, make sure you fully understand the benefits and restrictions of an annuity. An licensed annuity agent can assist you in making this determination.
Life insurance taxation
Death benefits paid to a named beneficiary from life a insurance policy are free from income tax.
All important decisions affecting your life should be directed to a licensed and authorized professional
Will annuities avoid probate?
Yes, as long as the annuity contract has a named beneficiary. (designated by the annuity owner) When death occurs, the accumulating funds within an annuity can be transferred to your named beneficiaries, avoiding probate expense, and the public notice of probate. If the annuity contract does not have a named beneficiary or the "estate" is designated, the funds could be subject to probate.
All important decisions affecting your life should be directed to a licensed and authorized professional.
Deferred annuity or immediate annuity
A deferred annuity is a long-term vehicle designed to grow account value (accumulation) over time. The deposits to a deferred annuity can be lump sum or numerous payments over time.
Immediate annuities are used for income flow (generally monthly) for a specific time, even lifetime. Most "deferred" annuities have provisions to allow them to convert from an accumulation stage to an income. In most cases an immediate annuity is purchased by a lump sum deposit. The annuitant can select almost any time period in which to receive the annuity payments.
Are there hidden fees on annuities?
You are 50% right and 50% wrong.
"Variable" annuities have fees which will generally continue for the life of the contract. These fees are for mortality fees,expense fees, administration fees, money management fees, enhanced death benefit rider fees and income rider fees. The total of all these fees could easily be 3% of your annuity value per year. These fees are automatically subtracted from you annuity account value. always consult your broker and read the pro annuity prospectus for details, product vary greatly)
If you buy a fixed (interest earning) or a fixed indexed annuity, there are no fees or expenses. (a few annuity companies may offer an "enhanced" income rider that can have a charge or expense. Ask your agent if the annuity he/she proposes has any fees. Also you cna call the company directly and verify anything which you might question.
What happens to my annuity when I die?
An annuity is a legal contract containing the owner, annuitant and the beneficiary. If the owner names a "beneficiary" the beneficiary will receive the funds immediately at the death of the owner or annuitant (options here)without delay or PROBATE costs.
If you had been receiving income from your annuity, the ramaining payments would go to your named beneficiary.
Most beneficiaries will receive their funds within a matter of days.
Annuity Interest Rates
Interest rates for annuities are based on the 10 year US Treasury rate. As US Treasuries go up or down, annuity rates will generally follow. Interest rates can also be state specific because the insurance industry is regulated by each state and not the Federal Government.
Are annuities guaranteed? And by whom?
Not many people know that annuities are guaranteed just like bank accounts only through a different system. Banking deposits are guaranteed through the FDIC whose limits can be as high as $250,000. Annuities are state specific and are guaranteed by each state"s "State Guarantee Fund"....limits can be between $100,000 and $500,000 dependent on the state. Contact your specific state Department of Insurance for limits.