What is an Annuity?
 Annuities
have been in existence for well over two hundred years. The very first mention
of Annuities in the United States was the use of these products by the
Presbyterian Church in 1740 to provide security for the clergy and widows.
Annuities allow you to accumulate tax-deferred funds for retirement and then, if
you desire, receive a guaranteed income (this process is called Annuitization)
payable for life or for a specified period of time: generally a term of five or
ten years.
Annuities are offered by Insurance companies and sold through licensed
agents. The insurance company must be evaluated and licensed in your state as
does the agent. State insurance commissions scrutinize Insurance companies to
ensure they have reserve funds, commonly referred to as State Legal Reserve
Pools, in place to protect investors before granting insurance companies
licenses. If an insurance company goes out of business other insurance companies
licensed in state must assume bankrupt insurers obligations and liabilities.
Note that this protection protects fixed-rate annuity holders only, with some
protection afforded to variable annuity owners.
Annuities are very similar to CDs offered by banks. Just like banks insurance
companies offer different rates and returns on annuity investments.
Advantages of Annuities:
All annuities have three primary advantages: Tax Deferral, Avoidance of
Probate, and a Guaranteed Income (optional) for a fixed period of time, or
income for life.
More specific reasons to invest in fixed and immediate annuities:
- You need to safely create wealth for your heirs
- You need tax-deferred growth
- You need your principal and interest guaranteed
- You need your heirs to avoid probate upon your death
- You need an increased death benefit
- You need stock-market linked gains without the downside risk
- You have money that is designated for inheritance
- You do not need more than 10% liquidity annually
Click the navigation on the left-hand side to find out more about each type
of individual annuity.
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