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Immediate Annuities

Which Type of Annuity Fits Your Goals?

John CasaSanta

We often hear the expression that an educated consumer is the best consumer. I believe this holds true, whether someone is purchasing an appliance or an annuity. When visiting a client for the first time, after a discussion of goals and objectives, I like to explain the four types of annuities. Immediate Annuity – This is similar to a personal pension and the most traditional form of an annuity. When you implement an immediate annuity, you will receive a set amount of money for a...

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Which Is Better For Future Income….Longevity Annuities or Income Riders?

Stan The Annuity Man

Question: I’m looking to set up a guaranteed lifetime income stream to start sometime in the future.  Which is better, longevity annuities or income riders? from Tom in Portland, Oregon Answer: Excellent “head scratcher” Tom, and this is one of the most important questions currently in the world of annuities.  What you are talking about is target date or income later planning.  You want to plan a lifetime income stream to turn on in the future, and would like to be able to know to...

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Taxation of Deferred and Immediate Annuities Explained

John L. Olsen

In the workshops and classes I teach, I often remark that “one good thing about deferred annuities is that they get tax deferral (that the interest earned is not taxed until it is distributed in a withdrawal or surrender); one bad thing about them is that they get tax deferral”. That’s not merely a lame joke. It’s a recognition that tax advantages always come with a cost. In the case of deferred annuities, the “cost” of tax deferral is twofold: All distributions from any annuity,...

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What Is The True Value Of An Immediate Annuity?

Stan The Annuity Man

Question: I need an additional income stream for me and my wife and am looking at a Single Premium Immediate Annuity as a possible solution.  How do I figure out the return?  What is the true value? Fred from San Antonio, Texas Answer: Thanks for the question Fred.  This is a topic that is becoming more and more prominent of an issue as baby boomers retire and need more guaranteed income.  As a short history lesson, Immediate Annuities (also called – Single Premium Immediate Annuities)...

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Should I Buy An Immediate Annuity Or An Indexed Annuity?

Stan The Annuity Man

Question: I need to supplement my income stream right now and have been shown an immediate annuity by one agent and an indexed annuity by another agent.  The products seem very different.  Which is the best one to buy? Ernie from Billings, Montana Answer: Thanks for the question Ernie.  Immediate annuities (i.e. Single Premium Immediate Annuities) and indexed annuities are drastically different strategies, so I’m a little surprised that you were shown both for income needed to start right now.  Since that is what you...

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What Are The Different Kinds Of Annuities?

John L. Olsen

If you’re like most people, you find the subject of annuities confusing. Just the terminology would befuddle anyone – “exclusion ratio”, “annuitization”, “indexed”, “cap rate”, “participation rate”, etc. As if that weren’t enough, the terms are not applied uniformly. Some writers about annuities refer to the kind that produces an income immediately after purchase as an “immediate annuity”; others call it a “payout annuity”. “Equity index annuity” and “fixed indexed annuity” are used almost interchangeably to refer to the same type of contract. And some...

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Should I Take A Lump Sum Or The Annuity Payments?

Stan The Annuity Man

Question: I’m leaving my current job and have been given a couple of options concerning my retirement plan there.  Should I take the lump sum and move on, or should I take the annuity payment? Eric G. from Fullerton, California Answer: Great question Eric, and one that does not have a perfect “one size fits all” answer.  First of all, when you leave an employer, sometimes they offer you a lump sum option that you can transfer to a personal IRA to manage however you...

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Annuity Surrender Charges Explained

John L. Olsen

Surrender charges are imposed by most, but not all, Deferred Annuities (Immediate Annuities generally impose no surrender charges because most Immediate Annuities cannot be surrendered for cash). It is vitally important that prospective buyers fully understand the impact of these charges on the Deferred Annuity’s cash surrender value, when they’re imposed, and when they’re waived. Some critics of annuities assert that surrender charges are wholly unattractive, that they always work to the buyer’s disadvantage. This is neither accurate nor fair. Let’s look, now, at how...

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What Is The Purpose Of An Immediate Annuity?

Stan The Annuity Man

Question: Why would anyone buy an immediate annuity?  What’s the purpose of it?  Isn’t it just getting your money back? from Taylor G. in Los Gatos, California Answer: Interesting questions Taylor, but very good ones.  An immediate annuity is formally called a Single Premium Immediate Annuity, and also known as an income annuity.  It is the original annuity product and was first introduced in Roman times. People buy immediate annuities because they are looking for a pension type income stream.  They want to make sure...

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How Do You Know If An Annuity Is “Suitable” For You?

John L. Olsen

If you are considering the purchase of some kind of annuity, you know what you want and need. But how can you determine whether the annuity product being recommended to you will meet your needs better than a different kind of annuity or some non-annuity alternative (such as a CD or mutual fund)? And how did the insurance agent showing you the annuity decide that the product he’s showing you is the one most suitable for you? The answer to both questions lies in that...

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