Annuities

An annuity is a lump sum of cash invested to produce a monthly stream of income for a fixed period or for life. The income can start now (immediate annuity) or in the future (deferred annuity). The size of the future monthly check isn’t always a given...it depends if the annuity is fixed or variable. 

Fixed Annuities are safer investment vehicles. Fixed Annuities don’t have as much potential gain as a Variable Annuity, but they also don’t have the risk. You can’t lose money if the market is bad and there’s often a minimal guarantee of interest. 

Variable Annuities have the potential of larger gains, but your money is at risk, because it’s directly tied to the stock market. You can make a lot of money…but you can also lose a lot. 

Multi Year Guarantee Annuities (MYGAs), which compete directly with Savings Accounts or Cds. These usually come in terms of 3, 5 or 7 years and have a Guaranteed Interest Rate for the entire term. 

Fixed Index Annuities are tied to the stock market. There’s growth potential without the risk of losing any, so long as you leave it untouched for the length of term you originally chose, usually 5-15 years. 

Fixed Annuities have liquidity. After the first year, most allow you to withdraw up to 10% of your account value each year without penalty. Any more than that will be subject to a surrender charge(which gets smaller each year). 

Fixed Annuities have many advantages over CD's. The biggest advantage is that a Fixed Annuity allows your investment’s earnings to compound tax free until you take it out.....with CD's you pay taxes on the interest earned each year. 

At the present, interest on Savings Accounts is almost non-existent, and interest on Cd's isn’t much better.  

       MYGA (5 Year

$100,000 + 4.05% = $104,050

$103,000 + 4.05% = $108,264

$106,090 + 4.05% = $112,649

$109,273 + 4.05% = $117,211

$112,551 + 4.05% = $121,918

        CD (5 Year)

$100,000 + .85% = $100,850

$100,850 + .85% = $101,707

$101,707 + .85% = $102,572

$102,216 + .85% = $103,444

$103,085 + .85% = $104,323

                               $  17,595

As you can see, the Multi Year Guarantee Annuity produced more than $17,000 more in earnings than the CD, and this isn’t even taking into account that the MYGA interest isn’t taxed until it’s taken out…the interest earned on the CD is taxed each year, so the earnings are even greater with the MYGA. 

If you would like to see how you can have greater earnings with your savings which will make your retirement more enjoyable, feel free to call me @ (217) 778-8590