The Advantages of Life Annuities

Life annuities can be a very profitable investment, especially if you want to increase your financial gains during retirement. A life annuity works similar to a life insurance policy. You invest a sum of money and after several years, you receive the invested sum as regular monthly payments.
How does it work?
There are two main phases: the accumulation and the distribution phase.
In the accumulation phase you deposit an initial lump sum to the annuity’s account. In the case of variable and fixed annuities, the investment grows at a fixed or variable rate over the years. Withdrawing money from the account is possible; however, most contracts will penalize you if you retire money from the account before a certain number of years have passed.
A life annuity is a long-term investment, which means that the distribution phase will start after 20 or 30 years, depending on what you choose. The distribution phase means that the insurance agency will make regular monthly payments, like a pension. You will continue to receive regular payments till the end of your life.
How can it help you?
A life annuity works like a retirement-insurance fund. During retirement, your income sources diminish since you do not have a job anymore. Thus, sustaining yourself during retirement can be a problem. In many cases, the pension and the social services checks are not enough. There are many unexpected spending, especially when it comes to health. You may find yourself in constant need of medical care and treatments. In such cases, some extra money is always welcomed.
A life annuity can supplement your income during retirement. It is best bought when you are at the height of your financial situation. In most cases this is sometime during middle-age. You just have to pay a big lump sum, and then wait for the money to grow and get your monthly paychecks.
You can also use an annuity to financially secure your spouse. By purchasing an additional rider you can name your spouse as a beneficiary. This means that he or she will continue to receive the benefit, after you die.
Final words
As I have pointed, buying an annuity can help you supplement your income during retirement. However, such a contract is not without its risks. Contrary to life insurance, an annuity is maximized if you live for a long time. If you die too soon, you will not get the investment back.

The Global Recession Further Devalues the UK Life Annuity

The current worldwide recession seems to have impacted every aspect of the global economy. Currencies’ values are dropping. Banks and other financial institutions have little credit to offer its customers. The bankruptcies of corporations have created a domino effect, resulting in the bankruptcies of individuals. In fact, the current global recession has even impacted the UK life annuity [http://myfireweb.com/commercial-finance/7-top-tips-for-choosing-the-best-uk-life-annuity.html], making it more challenging for retirees to live comfortably, after being in the workforce for four or five decades.

THE SITUATION

First, we should review some background information. Retirees use their pension account to purchase an annuity from insurance companies. They then receive a regular income, which yields from government gilts or bonds will fund. Recently, the Bank of England announced that it would print up £75 billion, in order to purchase the gilts. What is the result? Consider the case of a man and woman (aged 65-years-old) with a mean life expectancy, who have taken out a joint-life annuity. Their mean yearly annuity payments are now roughly £400 lower than when annuity rates hit their maximum values in 2008!

POUNDS AND PENSIONS

This drop in annuity rate values has been ongoing since they hit their highest values in six years, during the summer of 2008. While annuity rates have been dropping for multiple months, the latest infusion of £75 billion will cause their values to further plummet. Thus, the annual payments of annuities that Britons purchased last year are significantly higher than those that Britons purchase this year.

While the Bank of England’s buying of government and corporate bonds significantly boosted the price of such bonds, their interest/yield dropped drastically. As a consequence, the income of pension funds dropped, thus reducing how much insurance companies will distribute to retirees with annuities.

How can pensioners combat the dropping annuity interest rates? For those who are planning to retire in the near future, they should shop around before buying an annuity, or delay the purchase of their annuities. Britons are allowed to purchase annuities until the age of 75-years-old.

HOPE FOR THE BEST

Fortunately, the outlook for annuities is not entirely dismal. It is possible that annuity rates could rise within the long term. In fact, the UK may infuse a maximum of £75 billion more to purchase government bonds. However, the government is still waiting to see the effect of the first infusion of £75 billion.

One fear of financial experts is that the inflation rate for pensioners will rise after having already risen significantly. Such inflation increases have caused retirees to reduce their spending on important expenditures, including food, medication, and utility bills. Thus, it is important for pensioners to claim the full benefits for which they qualify.

The current recession has already devastated the global economy, including UK annuities. While the future is uncertain, soon-to-be retirees should consider searching for a better deal on annuities, or even delay the purchase of their annuity! While a recovery will eventually occur, you must never postpone the opportunity to enjoy your retirement in comfort!

9 Steps To Investing In Annuity Schemes

As Investments in annuities is an excellent way of saving for retirement. Annuity savings assure future security and have no limitations of time or investment extent.

Annuities give an assured payback to the investor and are of different types according to the payout options and duration. Payment options are decided on by the investor and the accrued money can be taken in time of great need. Annuity investments can be bought jointly and the beneficiary will be covered even after the demise of one of the investors.

Annuities are a great investment, however, the US Securities and Exchange Commission hosts in depth information so that investors can make educated investments; see: [http://www.sec.gov/investor/pubs/varannty.htm].

Annuities have different disbursement options: Life annuity is one where the investor will receive payments until death; Life Annuity with Period Certain is one which pays for a fixed period of time even after death to the joint owner or beneficiary; Life Annuity with Amount Certain is one where instead of the number of years the payment will be made until a fixed pre-determine amount is reached; Life Annuity with Joint Survivorship is one where the beneficiary/survivor will get payments indefinitely when the investor dies.

Here are a few expert tips:

1. Study different annuity plans and make a note of what you are looking for. There are different annuities depending on their payout options and durations. Know what an “immediate or deferred plan” is and what “fixed or variable” plan entails.

2. Ask whether there are any in built costs charged by the annuity plan. Many plans charge an annual or entry fee.

3. Determine whether you will lose any money if you decide to stop investing in mid-way.

4. Calculate what amount of money earned will be paid out as taxes on income. Or what will happen if you defer tax payment until withdrawal.

5. Learn all about payout options. Most annuities have five payout options: Life Only, Certain and Life, Fixed Period, Fixed Amount, Joint and Last Survivor.

6. Study the health and reliability of the company that has floated the annuity scheme. Find out the credit rating of the company as it will reflect the financial health of the company. A credit rating is an independent assessment of a company’s ability to pay claims on time and meet all other financial obligations.

7. Use the services of an experienced investment agent. An agent will help you understand the annuity schemes terminology and aspects like estimates, projections, and guarantees.

8. Avoid listening to unwarranted advice to replace an annuity you have chosen with another. Think losses before you get swept away by a clever sales pitch.

9. Determine your risk element. In annuities you must know what the investment risk is. Find out whether your risk is low or high. The more aggressive a fund the higher is the risk.

Annuity schemes are popular and the earlier the investment begins the greater the benefit for the investor.

Factors That Can Help You Understand Annuities To Make Better Investment Decisions

An annuity is a form of insurance that assures a certain amount of insurance for a certain amount of time. It has many benefits, is available in various types which are computed using different factors, and it is taxed in multiple ways.

For many middle-aged people, annuity has become a popular insurance investment choice. Having a clear understanding of investment terms, which can be confusing, will be a huge help in making the wisest choices for the future. This is how an annuity works:

Explanation of annuity

Annuity is a type of insurance investment in which you, as the insured investor, receive periodic payment returns starting in a guaranteed year. You are able to receive payments the rest of your life or during set periods. You can pay for the annuity in spot cash or in long-term, affordable cash payments.

Ways in which annuity can be beneficial to you

There are many ways annuity can benefit you. First, when you’re preparing for retirement, it can be an excellent income source. At the age of 60, just at the time of your retirement, most of the annuities start paying out. You will still receive periodic amounts from your annuity even if you have no more job. If you have a child under the age of five, you can use investments of this type to aid in long-term goals, like a college funds. With annuities, taxes are deferred. This is because, only when the returns are paid out, will your investment earnings will be taxed. Finally, annuities can be very accommodating. Your goals can be matched with a particular annuity type that is offered through an investment company by an insurance agent who, through Annuity Leads, may have read your information and conditions.

Types of Annuity

Depending on your annual wages, your premium payment terms, the conditions of your returns payment, and other annuity variations, there are different types of annuities.

Based on the best terms of payment. When paying your premiums, annuity premiums can either be flexible or single. One premium annuity will allow you to pay it off in one lump sum payment. On the other hand, flexible premium annuity allows you to pay for the annuity in smaller amounts paid regularly over a certain period of time.

Your annual earnings is going to be the deciding factor for the outcome. The yearly payment can either be a specified amount or an amount that can be changed from time to time. Fixed annuities guarantee a fixed amount of annual returns, consisting of your principal and interest. These annuities are usually invested in government securities or other conservative types of investments. Annuities invested in more flexible investments, such as mutual funds, are variable annuities, alternatively. With variable annuities, payments made to you are variable, not guaranteed, and depend on the earnings your annuity makes.

The resulting outcome will depend on your returns payment terms. Your choices in the payment of returns are: life annuity or term annuity. Regular payments for a certain period of time is guaranteed by term annuity. Your beneficiary is entitled to receive the remaining returns, in most term annuity policies, if you pass away during your payment period. You are guaranteed payment for the rest of your life with life annuity, but after you pass away payment shall be stopped and no refund will be issued.

Other variations. Joint annuity is one another kind of annuity fit for married couples. Joint insurance policy is designed in such a way as to take care of the surviving partner, by way of payment of regular returns, if in the course of the currency of the policy, one of the two partners expires. Term certain is also another type of annuity that combines both term annuity and fixed annuity, where you receive fixed return payments for a fixed period of time.

Annuity payments affected by factors

Four key factors which contribute to the amount of payment returns you get include your principal, your interest earnings, demographics, and also the term of payment. Higher would be your payment returns, if the amount of your principal and your interest earnings is higher. An important role is also played by demographics. The life expectancy in your state will affect your periodic returns. Finally, if the period of payment is longer, you may receive smaller annuity payments compared to shorter or term annuities.

Paying the appropriate taxes

Annuities are subject to taxes, but they are also deferred. Only when you are getting paid returns are you responsible for paying taxes on it. There are prescribed, as well as non-prescribed annuities. Prescribed annuities are those that allow for payment of taxes evenly all throughout the term of your policy, while non-prescribed annuities are those that allow for payment of taxes in a gradually decreasing manner until taxes reach zero.

Make sure to decide the type, that suits your condition and your future needs better, when you wish make use of an annuity. In order to get the best value from your investment, compare quotes from different insurance or investment companies.

Personal Finance and money Management 31 – Types of Life Annuity

As we mentioned in other articles the government only represents about 30% of our retirement income, the company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. Now you have reached your retirement age, there are some important investment options for your RRSP or 401k plan. In this article, we will discuss types of life annuity.

1. Guaranteed term annuity
a)An annuity that guarantees to make payments for a minimum period even if you die, any payment remaining in the contract is paid to your spouse or beneficiary.
b) Payment from the insurance company at the end of the guaranteed period, if you are still alive.
c) Normally, it is guaranteed up to age 90. The longer the guaranteed period the smaller amount of regular payment.

2. Joint and last survivor annuity
A joint life and last survivor annuity provides payments to you and for that of a second life. Payment continues with the same amount, after the first person dies. This type of annuity appeals to married couples. For registered funds, the joint life must be a spouse.

3. Single annuity
a) The annuity provides benefits for one person only.
b) Payment is based on life expectancy of annuitant.
c) Payment stops, if the annuitant dies.

4. Insured annuity
You liquidate your interest-bearing investments and use the resulting cash to purchase a life annuity contract.
a) The contract contains 2 parts insurance and life annuity with no guaranteed period.
c) Medical examination is required for you to qualify.
d) Capital preservation for the estate if you die.
The benefit of insured annuity includes increased cash flow to you while you’re alive, and insurance portion benefits to your estate at death.

An Immediate Life Annuity Returns Assurance and Potential Earnings

An immediate life annuity can be a good investment against outliving your money – a very real issue for retirees. That’s because it offers two returns – assurance of an income for the remainder of your life, and the possibility of earnings higher than you could get elsewhere if you live long enough. This article shows you how to figure your possible earnings aside from the assurance of never running out of money.

A fixed immediate life annuity pays you until you die. It’s a unique investment offered by annuity companies. More accurately, it’s a contract you make with an insurance company to pay you a fixed monthly payment for the remainder of your life for a given premium. Your premium becomes the insurance company’s money. But how can you evaluate your return on your premiums?

Your financial situation may make an immediate annuity the best investment for you What investment advisors sometimes forget is that the assurance of receiving a lifetime income – no matter how long you live – is a very real return. This is especially so if you can’t live off just the annual earnings of your savings. If that’s the case then depending on what you’re yearly income need is and your remaining life expectancy you may deplete your savings before you die.

If that’s your situation, you may be better off buying an immediate life fixed annuity. For a given premium payment, you’d receive a fixed monthly income for as long as you live. And the older you are when you begin your immediate annuity, the higher is your monthly payout because you’re remaining life expectancy decreases with age.

Evaluating your annuity’s return Just being assured of receiving a monthly income for life that can sustain your living expenses is a return in itself – the ‘assurance return’. You don’t have to worry about outliving your savings.

The financial return, beyond this ‘assurance return’, on your premium really depends on how long you live. Often for lower remaining life expectancies, you may not receive your premium’s worth of monthly payments if you live only to the remaining life expectancy when you started it.

In fact if you just lived long enough to collect what you paid for your premium, your earnings would be zero; if you lived less time than this, your earnings would be negative. But that doesn’t make them a bad investment since the ‘assurance return’ is important too. Nevertheless let’s see how your financial return grows if you live longer than expected.

Take a man who’s 75 and has a remaining life expectancy of about 10 years. If he compared the interest rates he could earn on his life annuity with those of a fixed 10 year term annuity, he’d probably find the interest rate for the life annuity to be smaller. That’s because the life annuity presents more risk to the insurance company than the fixed term annuity – which guarantees his premiums and some earning paid to him over that term – no more or less. Nevertheless, living longer than your remaining life expectancy eventually returns more than your premium. That translates into having earned a higher interest on your premium; each year longer you live increases your earnings.

Let’s suppose – as an example – that the life annuity pays the 75 year old man $833.50 per month (i.e. $10,000 per year) for a $100,000 premium. At 10 years (at 85 years old) he’s received back only his premium- so no earnings received. But each year he lives longer, his payments will be in excess of his premiums. So they can be considered as earnings on his premium investment (as if he were investing in bonds).

So if the 75 year old lived 15 years rather than the 10 years expected, he’d have received 50% more than the $100,000 premium which equates to almost 6% annual earnings. That’s not a bad investment. And the longer he lives the higher will be his equivalent annual earnings.

That’s how those ‘potential’ earnings can really increase overwhelming other more conventional investments.

An Immediate Life Annuity Returns Assurance and Potential Earnings

An immediate life annuity can be a good investment against outliving your money – a very real issue for retirees. That’s because it offers two returns – assurance of an income for the remainder of your life, and the possibility of earnings higher than you could get elsewhere if you live long enough. This article shows you how to figure your possible earnings aside from the assurance of never running out of money.

A fixed immediate life annuity pays you until you die. It’s a unique investment offered by annuity companies. More accurately, it’s a contract you make with an insurance company to pay you a fixed monthly payment for the remainder of your life for a given premium. Your premium becomes the insurance company’s money. But how can you evaluate your return on your premiums?

Your financial situation may make an immediate annuity the best investment for you What investment advisors sometimes forget is that the assurance of receiving a lifetime income – no matter how long you live – is a very real return. This is especially so if you can’t live off just the annual earnings of your savings. If that’s the case then depending on what you’re yearly income need is and your remaining life expectancy you may deplete your savings before you die.

If that’s your situation, you may be better off buying an immediate life fixed annuity. For a given premium payment, you’d receive a fixed monthly income for as long as you live. And the older you are when you begin your immediate annuity, the higher is your monthly payout because you’re remaining life expectancy decreases with age.

Evaluating your annuity’s return Just being assured of receiving a monthly income for life that can sustain your living expenses is a return in itself – the ‘assurance return’. You don’t have to worry about outliving your savings.

The financial return, beyond this ‘assurance return’, on your premium really depends on how long you live. Often for lower remaining life expectancies, you may not receive your premium’s worth of monthly payments if you live only to the remaining life expectancy when you started it.

In fact if you just lived long enough to collect what you paid for your premium, your earnings would be zero; if you lived less time than this, your earnings would be negative. But that doesn’t make them a bad investment since the ‘assurance return’ is important too. Nevertheless let’s see how your financial return grows if you live longer than expected.

Take a man who’s 75 and has a remaining life expectancy of about 10 years. If he compared the interest rates he could earn on his life annuity with those of a fixed 10 year term annuity, he’d probably find the interest rate for the life annuity to be smaller. That’s because the life annuity presents more risk to the insurance company than the fixed term annuity – which guarantees his premiums and some earning paid to him over that term – no more or less. Nevertheless, living longer than your remaining life expectancy eventually returns more than your premium. That translates into having earned a higher interest on your premium; each year longer you live increases your earnings.

Let’s suppose – as an example – that the life annuity pays the 75 year old man $833.50 per month (i.e. $10,000 per year) for a $100,000 premium. At 10 years (at 85 years old) he’s received back only his premium- so no earnings received. But each year he lives longer, his payments will be in excess of his premiums. So they can be considered as earnings on his premium investment (as if he were investing in bonds).

So if the 75 year old lived 15 years rather than the 10 years expected, he’d have received 50% more than the $100,000 premium which equates to almost 6% annual earnings. That’s not a bad investment. And the longer he lives the higher will be his equivalent annual earnings.

That’s how those ‘potential’ earnings can really increase overwhelming other more conventional investments.

Advantages and Disadvantages of Fixed, Life Annuities for Retirement

A fixed, life annuity will pay you a fixed income for as long as you live. This is a very attractive feature of a retirement investment to which many soon-to-be retirees give serious consideration. But all investments have both good and bad points, and fixed annuities are no exception. Here , I overview some of a fixed life annuity’s advantages and disadvantages.

*Advantages of fixed, life annuities:

As mentioned above, the main benefit is that a life annuity offers you a monthly income for as long as you live – for a given amount of money. You may contribute that money all at once in a lump sum or you may have contributed it over the years in a series of payments.

Three important features of an annuity are tax-deferred accumulation, safety, and guaranteed life income. The tax-deferred accumulation – in comparison to a similar taxable investment – allows for greater accumulation since earnings are not taxed away annually. The tax-deferred accumulation is for all you contribute to the annuity before you ‘annuitize’ it to begin the annuity payments to you.

Annuities have been very safe vehicles in which to invest. Only very rarely have defaults occurred. There are state guarantees and company procedures that help assure your annuity investment. Nevertheless, you should always check out the strength of any insurance company you’re considering buying from.

With the guaranteed life income payout option, you don’t have to worry about market downturns that could rob you of income – a common feature of so many other investments.

Also if you can put off your payout until you’re older, you’re annuitized monthly payout will increase not only from increased accumulations of your earnings but your reduced life expectancy. That’s because the shorter is your statistical remaining life expectancy, the more the insurance company will pay you per month.

*Disadvantages:

Because an annuity is a long-term investment with tax-deferred status, the IRA imposes a 10% excise tax penalty on any withdrawal before age 59 1/2. That’s in addition to any income tax you pay on those withdrawals.

Insurance companies typically impose annuity fees on withdrawals you make early in the accumulation years. These can significantly cut into those withdrawals. So if you’re contributing to an annuity over many years, plan on holding off for 10 years or so to let your earnings offset this effect and for those fees to expire.

Since your money is placed with an insurance company in an annuity contract, you have little control over the rate of return on your investment. A good company will pay a return competitive with that credited on 52-week Treasury bills, and maybe slightly higher.

Although with a fixed annuity you’ve eliminated the possibility of market risk on your investment, you have created the risk of losing purchasing power. The fixed annuity means that your monthly payout when annuitized remains a constant (fixed) dollar amount. Inflation is always present, though. It will reduce the purchasing power of that monthly payout. Over a long term payout time, inflation can seriously erode that purchasing power.

Lastly, when you choose a lifetime income for your annuity payout, the contract generally leaves no residual money for your heirs when you do die – no matter how soon you die after beginning your annuity payments. That’s the other side of the gamble on a lifetime payout.

Nevertheless, you can choose options that can remedy this downside to some extent. But those options come at the cost of lower monthly payouts.

Great West Life & Annuity Company in Perspective

A trusted annuity insurance company is the most important thing a retiree should have. If a lesser known company offers an annuity rate that is far more than what others in the market offer, then an investor should consider it with utmost scrutiny. That company might be promising more than it can offer. Later on the investor will experience problems with his investments and will be full of regrets.

Annuities are the same with other forms of investments. It is something that should be well thought of and planned. Especially if you’re a retiree and the money you are investing is from years of working hard. You need to give value to your investment. You need a partner to help you reach your goal of enjoying the rest of your life in comfort. You need someone you could trust. You need the security that Great West Life and Annuity Insurance Company.

For years, Americans have found out that Great West is a company that can help them achieve what they want. The company serves millions of customers. Their products vary, they have full range of health plans, life and disability insurance, retirement savings products and services and, of course, annuity plans. The company has become a respected and well known provider of retirement savings plans as well. This is the image that the company has carved, a solid reputation of provider of opportunities for retirees and other investors as well.

To give you some company background, Great-West is made up of more than 6,000 employees. The company itself has a strong experience in finance and pre-need services plus has great financial ratings. They basically have a sales force of brokers, consultants, financial institutions, and discount brokers which markets their products and services nationwide. The company also has an admirable network of independent agencies which helps them achieve flexibility and viability in providing their products and services.

The company offers life insurance and annuity products that can are customized to meet the needs of any middle-income American as well as executives. Great-West has divided their efforts into groups to better improve the way they provide their services. For instance the Financial Institutions Markets group is the one responsible for selling life insurances to middle-income Americans. The company has different institution partners which aid them in distributing their products in direct mail, phone, Internet, and insurance-licensed representatives.

Meanwhile, the company also has a Key Business Insurance Group which offers products for specialized businesses. With this group, Great-West ties up with Clark Consulting to provide product and service solutions. With their ties with Clark Consulting, the company was able to increase its client base. Expanded products in the fields of banking and healthcare are just some of the additional services the company now can offer to clients.

This is the how the company became well trusted in the market. They made sound decisions for expanding their services through networking with equally trusted companies in the fields of annuity, healthcare, and other insurances.

The mission of Great-West Life and Annuity Insurance Company is to “achieve excellence in the development and distribution of health and financial products and services for Americans, and to do so in a thoroughly responsible manner.” The company has continued to grow and expand in their attempt to accomplish to the full extent their mission and goals.

How Much Does a Life Annuity Costs?

Is it worth buying life annuities? Is it a good or bad investment? Most financial experts argue against life annuities, but there are cases in which they can be useful. Life annuities fees can be quite costly and you shouldn’t pay for them unless you have to or if you know for sure that you can get some money out of them.
Most annuities are contracts signed with an insurance company. Fixed rates work in the same way as a cash value account. In exchange for the premiums you pay, the insurance company will give you back regular fixed annuities.
There are several fees that you must pay in order to receive annual annuities:
Mortality and Expenses charges. This means that the company is charging you with some money in order to guarantee you a death benefit. Remember that annuities are just like a life insurance policy, with the exception that it provides an annual income. Also, the insurer will deduct a part of your payment to cover administrative and marketing expenses.
Investment management fees. The accumulation account where your cash value grows must be managed by financial experts, who will look over your investments. Such services require you to pay a tax. The fee depends on how actively your accounts are managed. Growth stock accounts, for example, require a stricter management. The fees range from 0.5 for bond accounts to 1.5 percent for aggressively controlled ones.
Surrender Charges. The general attitude towards life annuities is that of a long term investment. Nevertheless, investors feel a bit more comfortable if there is a way in which they can cancel the contract without losing all their money. Deferential life annuities will allow the customer to make annual withdrawals as long as the sum is not higher than 10%! If you want to withdraw a higher sum, the insurance company will charge you a surrender fee which depending on the sum is between5 and 10%. The fees decline with one point by each year of the contract, so in the end of the surrender period there is no charge.
Annuities also offer optional features and guarantees which you can purchase. These additional features are designed to better protect your investment. You should evaluate your current financial situation and determine if you need to pay the extra fees.
Annuities can be a good way of securing a good and stable annual income, but it also has its risks. Ask your financial adviser for more information!