What are the pros/benefits/good/advantages/rewards of the annuity program:
What are the cons/disadvantages/bad/risks/pitfalls of the annuity program:
Some questions potential annuity investors should ask themselves:
The downside of annuities
Annuities have plenty of detractors. Some of the reasons they cite for staying away from annuities include:
Fees and expenses. Annuities will typically charge higher percentages in fees than mutual funds, CDs and other investments. Fixed annuities charge annual fees that may total 2 percent to 3 percent or more of the account value. These include a mortality and risk expense charge, and an administrative fee. There will also be fees for any optional benefits.
Tax treatment. While annuities grow tax deferred, other tax treatments of these product may put them at a disadvantage to other investment vehicles.
First, annuity income is taxed as ordinary income, whereas other appreciated assets are taxed as capital gains. The capital gains rate, which is currently 0 percent for the lowest income earners and caps out at 20 percent, is lower for most individuals than the ordinary income rate, which ranges from 10 percent to 39.6 percent. Therefore, you’ll pay a higher percentage on the gains in your annuity contract than you would investments taxed as capital gains.
Annuities that are passed on after death are treated differently than other investments. Most assets get “stepped up” if their held at death. For example, if you invest $100,000 in stocks and die when they’re worth $120,000, the $20,000 gain is income-tax-free to both you and your heirs. This isn’t the case with an annuity. So not only will your beneficiaries inherit the cost basis and have a larger asset to pay tax on, they’ll be paying tax on it as ordinary income instead of a capital gain.
No pre-tax contributions. Unlike 401(k)s and IRAs, you do not receive a tax break for the contributions to make to an annuity.
Low rates. Many annuities, especially fixed annuities, are interest rate sensitive. Therefore, they are not crediting much in the way of interest during extended periods of low interest rates.
Lack of liquidity. Once you have committed premium to the annuity contract, it’s essentially unavailable for the duration of the contract, with a few exceptions.
If you purchase an immediate annuity, you lose access to the full amount of what you paid into the contract. You will receive the income payments for as long as you established in the contract, but you cannot get back your original capital.
Deferred annuities have a surrender period during which you have to leave most or all of the money in the annuity for that set period of time before you can take withdrawals. If the owner of an annuity insists on pulling money out before the end of the surrender period, the insurance company will assess a penalty known as a surrender charge.
Lack of flexibility. Whereas most retirement accounts allow you to withdraw as much or as little (within IRS limits) and vary your withdraws year to year, an annuity is more rigid in its income payments. Once you annuitize and begin receiving income, payouts will be distributed as stated in the contract. You can’t increase or decrease payments. If you elect an income rider, which will cost extra, you may be able to stop and restart income, but that’s about the limit to income flexibility.
Difficult to transfer. Some investments, including bonds, CDs, stocks and real estate, allow you to sell the assets just about anytime and receive the current market value. Not so with an annuity. Once the contract goes into force, it’s not easy to sell the contract for cash in the event you need more liquidity. Also, the company that buys your contract will pay you less than what the future value of your annuity payments will be.
Difficult to pass on to heirs. Traditionally, once the annuity owner passed away, the income stopped and the insurance company kept whatever was left. Many of today’s annuities allow you to pass on some of the annuity’s value to heirs, but it may only be equal to the original premium you paid or a certain number of year’s worth of income. Those who want this protection will collect less income during their life to pay for the benefit.
The bottom line is that, like any investment, annuities aren’t for everybody and they don’t work in every situation.
The single most significant attraction for investors to consider Annuities as a priority investment is safety.
Annuities guarantee investors against financial loss, and annuities provide different guaranteed income programs, and again the key feature is this no risk source of lifetime income.
In short, annuities provide the safest guaranteed income for investors when compared to stocks/bonds/mutual funds/etfs. When compared to CD account there is no comparison in that current annuity rates are up to 5-10X higher than a CD bank account.
Annuities also protect you from yourself, for instance, for how many years and how many times have hard working individuals from all walks of life all around the world have lost all their money in risky investments and Ponzi schemes? For how long and how many Private and Public company shares are manipulated by a few insiders? The most sophisticated investors and money managers have been victimized by bad investments as the opportunity seems to outweigh the risks (and everyone else is making a fortune with xyz investment so human nature is to not miss the boat).
Monthly income: Annuities provide income on a monthly basis helping you easily plan your expenses and lifestyle around this income stream alongside your social security and any other retirement income you may have.
In summary, annuities not only protect the average investor from risk of principal loss, but also from the risk of short term market speculation, fraud and investors with gambling tendencies directly related top short term margin and options trading (yourself).
The disadvantages about annuities, is they they usually come with a high upfront fee and a stiff pre-payment penalty if you draw out your money before the agreed date. So it is very important for investors to know that when you invest in an annuity, you must commit those funds for at least five years, or it will cost you a small fortune to draw that money out. Click Quote Save has compared thousands of annuity programs and annuity providers, allowing for seniors to quickly at no cost to compare annuity quotes.
Actually, locking your allocated investment money up and getting it out of your hands can be a good thing, because when friends and family run in to unexpected financial challenges, you will be able to tell them “The only money I have is in an annuity, I can’t touch it until it matures. You can’t lend money if your money is committed, You are also once again protecting yourself from unnecessary extravagant expenses like a car, boat or travel purchase that you don’t need. So annuities also protect you from yourself, lending to A to Z lost causes etc.
Now there are many different Annuity dealers and programs available in the market. The best approach to this are of investing is to clearly define your financial goals and desires and to speak to different representatives ( at least four or five) and to define the most important priorities in the right order before choosing the best fund for you. Let me help you with this, number one, you must know the product inside and out, number 2: you must know what you want in the form of income or dividend reinvestment and you must know ample program options.
Finally before choosing which investment to make, ask yourself this simple question “Is this a suitable investment for me and my family?”
Whatever your decision, Good Luck and please do your home work or at least allow us to help you. The pros of investing in annuities by far outweigh the cons but the program is not for everyone.
BBB rating: Does your annuity provider has a BBB rating? More importantly do they have any outstanding complaints or regulatory issues either through BBB or trade associations. It is important to check the rating and reviews of any licensed annuity agent/broker/dealer when considering making this investment. Click Quote Save scans the market and we make sure any introductions we make is with a licensed investment professional that has A ratings/reviews.
Comparing the market: Click Quote Save is on a mission to help you save time and money by allowing for easy comparison shopping. This is very important in the annuity industry as rate of return and fees can vary. We can allow you to speak to multiple agents within our platforms so you secure the best return for your family and retirement.
Cold calls: Receive a cold call regarding an annuity. The FTC/FCC recommends you hang up immediately as many scams are operated from call centers. Be extra cautious of dealing with any investments over the phone from an unsolicited cold caller. This is the first red flag and there are too many legitimate market players out there to get burned by a scam cold caller.
Seminars: Seminars that offer free diner are an easy way for agents to lure hungry potential investors to meet with. This can also be a red flag as an incentive is being used to draw your attention to one of the most important decisions you will make, where to invest your retirement fund. Be wary of any advisors you meet through this channel and always check their credentials.
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