It all comes down to WHO is Advising You.

Annuities are savings plans with tax-deferred growth. Your money is invested in one of three styles: Fixed rate, Equity-index linked, or Variable (investment choices). You choose when your distributions/annuitization/retirement date begins. You choose from different payment options.

Annuities are a "safe" investment. They are underwritten by Insurance companies - with incorporated downside insurance protection. Similar to Insurance policies the beneficiaries of Annuities avoid probate.

What you should know:

  1. Fixed, Equity-Index linked, or Variable - Your savings are invested in bonds and/or stocks. Equity-Index linked or Variable annuities provide you with choices of Indexes and/or Mutual funds.

  2. Interest rate, Participation rate, and Bonuses - Fixed annuities: you receive a return on your savings based on an interest rate. Equity-Index linked or Variable annuities: a participation (percentage) rate and/or caps (maximum rate) determines your return. Equity-Index linked annuities also provide Floors, Resets, Minimums or a Guaranteed Rate - to protect your savings against downside risk. Bonuses are "free" money that you are "given" upfront.

  3. Immediate or Deferred, and Term - Immediate annuities start distributions (withdrawals) within a year of the issue (purchase) date and are funded once. Deferred Annuities start withdrawals more than a year from the purchase date and are funded once or with multiple contributions. Lastly, the Term or "walkaway period" is the length of the annuity contract.

  4. Withdrawals, Loans, Payment options (distributions), and Medical hardships/Death Benefits - Withdrawals and Loan provisions allow you to take distributions during the contract. Income Payments or Distributions may also be taken after term/walkaway provisions. Your distributions can be over your lifetime (based on actuarial tables), over a certain period of time (based on a dollar amount or percentages) and/or Medical hardships/death.

  5. Surrender Charges and Fees - Surrender charges are usually assessed if you forfeit the contract before the term (walkaway) period and/or before age 59 1/2 (similar to other IRS Retirement plans). Other fees may impact your activities contractually.

  6. Brand Names - Many Insurance companies underwrite annuities. What makes choosing the right annuity difficult is that they are constantly changing. Only part of an annuity contract is GUARANTEED the rest is "subject to change". Furthermore, Insurance companies introduce/reconfigure NEW contracts monthly. Lastly, less than 1 out of 20 annuities (currently offered for sale) we consider worth recommending.

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