The Insurance Doctor

Tag: annuities

  • Annuities That “Don’t Suck!”

    Annuities That “Don’t Suck!”

    If you watch TV, especially in the daytime, you might be familiar with Fisher Investments.  Ken Fisher built his empire by saying “never buy annuities.”  He has inferred that ALL annuities suck! 

    Ken was probably referring to variable annuities, which can have high annual fees.  Just like anything else, there are good products and bad products.  An independent advisor’s job is to decipher products and make suitable recommendations accordingly.  When someone wins the lottery, they are usually given 2 choices, lump sum, or annual payments.  Annual payments are almost always a better deal for the winners, and they are a form of an annuity.  Does that suck, I would think not!

    October is known to be one of two months (April is the other) when most CD’s (Certificates of Deposit) mature.  This is because many people received their tax returns in April and bought 6-month CD’s.  Fixed annuities are an excellent alternative to traditional CD’s.  Not only are higher interest rates available from insurance companies, annuities have ancillary benefits and ways to access the money with no penalties or fees.  If CD owners withdraw ANY money from their CD’s, they forfeit ALL their interest.  Also, many people do not know that fixed annuities are backed by New York State up to $1,000,000 whereas the FDIC (Federal Deposit Insurance Corporation) standard insurance amount is $250,000 per depositor, per insured bank, for each ownership category.  CD rates are so low currently, some people refer to them as CERTIFICATES of DISAPPOINTMENT! 

    See below for 12 advantages to owning fixed annuities:

    1. Guaranteed Interest Rates: With a multi-year guaranteed fixed annuity, you know exactly how much money you will have at the end of the term.
    2. Guaranteed Principal: Your principal is guaranteed regardless of market conditions or company performance.
    3. Interest Rates: Annuity interest rates are higher than CD’s and most other safe alternatives that offer principal protection.
    4. Tax Deferred: The “power of compound interest” means that you do not pay income taxes until you start withdrawing funds, which allows for faster accumulation.  With CD’s, you pay income tax regardless if you take money out.  Annuities give YOU TAX CONTROL!
    5. NO FEES: With fixed annuities, you pay ZERO ANNUAL MANAGEMENT FEES while the account continues to earn tax deferred compound interest.
    6. Protected from Creditors: If you get sued, creditors cannot go after your fixed annuity funds.  This is why we like annuities in the portfolio when people inherit large sums of money. 

    NOTE: life insurance cash values are also protected from creditors.

    • Bypasses Probate: Fixed annuity death proceeds bypass probate; hence, they are private and save on estate and court fees, while going directly to their intended beneficiaries outside the will.
    • Lifetime Income Options Available: Most annuities will allow you, at any time, to convert (annuitize) into an income stream you cannot outlive. 

    NOTE: Life insurance is the only other financial instrument where you can receive a “guaranteed income for life.”

    • Annual Withdrawal Options Available:  Most fixed annuities allow for 10% or 20% annual “no fee” withdrawals.
    • State Guarantee Associations: Should the annuity insurance company become insolvent, there are state protections depends on what state you are in.  Most states have limits between $250,000-$300,000. 

    NOTE:  New York State and New Jersey have the highest state-protection limits in the country at $1,000,000 and $500,000 respectively!  For more information on this refer to www.Annuity.Org.

    1. Surrender Charge Waivers: Most of the newer fixed annuities have what are called “SURRENDER CHARGE WAIVERS.”  These waivers allow the annuity owner to withdraw more than the customary 10%-20% of the account, if the annuitant becomes confined, disabled, or has a terminal illness.  These are critical waivers to get access to your money when you need it most!
    2. Piece of Mind: Annuities are secure and offer “Piece of Mind” to account holders knowing they are safe from harm’s way!

    Despite what Ken Fisher says, annuities should be a part of most people’s portfolios based on the 12 advantages above.  For more information or questions on annuity products, feel free to reach out to me at Rob@InsuranceDoctor.us.  KEEP THE FAITH!

  • 3 Reasons & Solutions to have multiple retirement accounts

    3 Reasons & Solutions to have multiple retirement accounts

    Many folks have employer-sponsored retirement accounts like a 401k or 403b which is a good thing.  In fact, 80% of large companies offer a qualified (pre-tax) plan some of whom will life insurance, New Yorik city, match your contributions.  That being said it’s wise to set up at least one other supplemental plan for yourself because;

    1. You will pay later for today’s tax break: You will pay tax on 100% of your withdrawals which can bump up your tax rate and you won’t know what the tax brackets will look like at that time.
    2. Limited planning flexibility: If you need money to make an important purchase and inching up to the next tax rate the purchase might put you over the top hurting your bottom line.
    3. Limited access in the event of an emergency: If you are under age 59.5 and need to withdraw funds quickly you are facing a 10% penalty and taxation.

    Because of these issues we recommend setting up at least 1 other after-tax plan such as a Roth IRA, life insurance cash value policy, and/or a non-qualified after-tax account like mutual funds or annuities.

    Ask Robert about your 3 possible solutions for retirement accounts here or call him at (917)359-3985