Tag Archives: Lump Sum

Escape from Stock Market Uncertainty

Escape from Stock Market Uncertainty

Investors, especially those that experienced considerable losses and watched helplessly as their investment portfolios fell to pieces during the last stock market crash, are making much more cautious investment decisions today. A fixed annuity has gained a great deal of investor appeal for many cautious investors. Compared to alternative investments of equal risk, the fixed annuity has several significant advantages.

Fixed Annuity Advantages

There is the chance of significant appreciation when a lump sum is invested into a tax-deferred annuity, and the process is much quicker than a savings account or CD. The element of tax deferral is one of the most appealing advantages. Unlike other options where earnings are taxed each year, the tax-deferred annuity also allows taxes to be delayed or deferred until the money is withdrawn.

Another attractive fixed annuity advantage is the opportunity for guaranteed lifetime income. There is much debate about the future, potential of insolvency, and possible ineptitude surrounding the Social Security program(s). Many are fearful that the system will resort to a drastic decrease in benefits or entirely dissolve benefits. Comparatively, the guaranteed income of a fixed annuity is much more attractive.

The Baby Boomer generation, in particular, has lost faith in the federal government’s ability to contribute to their retirement income. This group is also not very prone to placing faith in the stock market or any volatile index investment. Instead, the Baby Boomer generation tends to opt for the less glitzy guaranteed return from a fixed annuity.

How to Choose a Fixed Annuity

First, you will want to find a company that has a stable and steady track record, as the annuity will most likely need to last you 10-30 years post-retirement. A sign of adequate financial stability can be found using a Standard and Poor’s rating. An “A” rating by a firm like this is usually a good indicator of stability. Make sure to look back at past ratings too; the goal is consistently high ratings for several years.

Peruse the numbers carefully. An unusually high guaranteed interest rate may be indicative of sizable fees, which will definitely decrease the return on your annuity.
You should also determine if there is a penalty for early withdrawal and the circumstances where the penalty might be waived. Generally, a fixed annuity will have a penalty or “surrender charge” if you withdraw the funds early. The penalty will usually phase out in seven to five years. However, some annuities feature a wavier of withdrawal penalties if you are critically ill or confined to an extended care facility.

The professional advice of Brian Gruss can be an invaluable asset when considering a fixed annuity.
Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1/2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.

Immediate Annuities Can Help You Secure Your Retirement Income

Immediate Annuities Can Help You Secure Your Retirement Income

As you approach retirement, it’s natural to worry about your retirement portfolio. It is also natural to become frightened during a recession, such as the ongoing downturn that started in 2008. During tough times, your entire strategy can suddenly become worthless. The supply of cash that you have carefully built up over your working life is gone, vanished like so much dust. This is downright scary. What shall you do? Many individuals in this same situation end up taking part-time jobs in order to support themselves.

An immediate annuity can help you regain liquidity. Buying an annuity is like buying a monthly pension check. It is an insurance policy that pays you a lifelong income stream in exchange for a lump sum. There is no age limit for purchasing an immediate annuity; you can buy one at 80 or 90 if you want to. When the payments start is entirely up to you. Once you decide on a date, the payments are orderly and on time, appearing on that date every month for the rest of your life.

Consider several advantages to immediate annuities:

  • Your insurance agent will be able to tell you what the monthly payment amount is based on your lump sum.
  • The annuity is backed by the financial security and assets of an insurance company, so do your research before buying.
  • This product affords you, the beneficiary immediate peace of mind since the payments start when you choose. You can rest completely assured of a secure, stable long-term monthly income. You can even add an inflation rider to the policy so that your income will not get eaten by inflationary pressures.
  • Since immediate annuities are different from stocks and bonds, there is no worry about volatility or market fluctuations. The value of the annuity remains constant. You have the protection of knowing that every month, the money will be deposited into your bank account.
  • There are no fees of any kind to be paid – no management fees, no setup or administrative fees, and no annual fees.
  • Favorable tax treatment – Only a small portion of income generated from an immediate annuity funded with after-tax dollars would be taxable.  This is because part of every payment is considered a return of principal.

Is an immediate annuity right for you? That depends on your unique needs of course. For those seeking to secure a future income stream, immediate annuities are a perfect way of achieving a guaranteed monthly income which will not fluctuate due to external forces. The peace of mind possible with having an income stream one cannot outlive should not be ignored.

Liquidated earnings are subject to ordinary income tax, may be subject to surrender charges and, if taken prior to age 59 1⁄2, may be subject to a 10% federal income tax penalty.

Guarantees and payment of lifetime income are contingent on the claims paying ability of the issuing insurance company.