Within the next 5 years, 60 million baby boomers will be retiring, and a large portion of them consider themselves unprepared. The number one goal for everyone entering retirement is establishing a significant source of income that is guaranteed for life. As boomers acknowledge they’re not prepared for a retirement that could last more than 30 years, their financial objectives will be to protect against investment losses and guaranteeing sufficient income to meet rising health care costs.
Clients are often seeking guidance on how to provide higher potential returns with guaranteed income while also addressing tax concerns and estate planning questions; our representatives at Ringo Financia are able to provide solutions to all those pressing questions. So contact us today!
More About Annuities
Annuities are an investment vehicle offered by insurance companies and can either be fixed or contributed to an index crediting account.
Insurance Protection: Annuities do not have FDIC protection. Annuities do have safety measures put in place by the state to ensure insurance companies have reserve pools in place. Insurance companies also display their financial strength by obtaining a rating from objective rating firms such as Standard & Poor’s, Moody’s, A.M. Best or Duff & Phelps. A solid financial backbone is usually accompanied with a solid rating.
Interest Rates: There are several variations of annuities. A fixed annuity provides a guaranteed minimum return by the issuing insurance company. A common guarantee on a fixed annuity would range between 2% to 6%. An indexed annuity credits interest based on a particular index such as the S&P 500.
Tax Treatment: All annuities grow tax-deferred; however, special action must be taken with qualified and non-qualified accounts. Taxes are only to be paid when money is withdrawn. The taxes that are being deferred remain in the investment to earn you more money, rather than being paid to state and federal agencies every year.
Liquidity: Annuities do have provisions that allow money to be withdrawn. Generally, 10% of the account value is available for withdrawal plus many contracts allow earned interest to be withdrawn on a monthly basis. Additionally, there are contract provisions that allow access to all your funds in the event you are hospitalized, undergoing a life-threatening illness, subjected to a permanent or extended stay in a nursing home, or other major calamities that affect you economically. Annuities can also be structured to pay-out for the life of the owner for a fixed term such as five or ten years; this spreads out your tax burden as well as provides enhanced income security. Annuities are long-term savings vehicles and may require a 10% federal tax penalty for withdrawal prior to 59 ½.