Annuity

Question: Annuity??? The periodic deposit is $3000 at the end of each yr. It is compounded annually 4% for 20 yrs. What is the value of the annuity and the interest?

Answer: $92,907.61 http://www.moneychimp.com/calculator/com… Of course, part of the "value" is also that it is likely tax deferred and passes to heirs more easily :-)

Question: If a variable annuity has a term of four yrs and the market is bad can the annuity become worthless? We were sold an annuity with the promise of 6% interest and supposedly that was guaranteed forever? Were we conned? Could our annuity become worthless in 5 or 6 or 7 years? The current value of the annuity is down.

Answer: It is 6% guaranteed forever. Example: you put in 100k. 6% of that is $6,000/year. You can take an income stream of 6k per year. If the policy goes down to 0, then they annuitize the policy and turn on guaranteed income for life based on some other calculation which puts it right around the 6%, could even be more. You weren't conned, the only issue is that if you ever want your money back in a lump sum in the future, you're taking it at market value, which depending on withdrawals and market volatility, could be anywhere.

Question: what annuity company will actually pay you to start an annuity with them? someone told they have an annuity with some company that gave them a small percentage of what they invested. has anyone heard of this? if so, what company or companies do that?

Answer: Yes, some annuity companies have a "bonus" on a specific annuity. Normally this is in the 2-4% range for a Variable Annuity for a fixed annuity you may get a 1-2% bonus for 1 year or 0.25 for few years. I cant recall the specific name of these annuities but you can research online or call annuity companies for bonus annuity

Question: What are the pros and cons of a variable annuity? My recently-retired parents have a lump sum of money (sizable but not huge) and have been recommended a variable annuity by a financial adviser. I have heard annuities are generally a bad investment because they have high fees, but a guaranteed return for them would be desirable. Can I get some pros and cons for a variable annuity in this specific situation?

Answer: Pros: 1. Broker usually gets 5% commission on the sale. 2. "Growth" is tax deferred until withdrawn. Taxed at ordinary income levels on withdraws. 10% IRS penalty for withdraws if under 59 1/2. Cons: 1. Insurance Company default risk. They are all in deep ca ca right now (AIG, AXA, AZ, HIG, ING, MET, etc..). I'd avoid them. 2. Long time 8-10 years back end load. Pay a penalty if take money out or move it elsewhere. 3. NO guarantees on investment performance, except fixed account which will not keep up with inflation. The "Guaranteed return," typically a "GIC - Guaranteed Investment Contract" is ONLY guaranteed by the full faith and credit of the insurance company - not guaranteed by any government agency. Guarantee is void if company goes under. If they tell you there are "fine, a strong company, how long they have been in business, their credit rating, etc., run! Look at their stock price! The only solid insurance co I know of is not public traded - USAA. (member restricted). https://www.usaa.com/inet/ent_utils/McSt… 4. Annual BS "contract fee" changed by insur companies in addition to the fees charged by the funds in the annuity. 5. If their F/A has less than 15 year exp, or esp under 5 years exp, find someone else. 6. If their F/A only sells, or primary sells insurance products, works for a bank or insurance company, RUN! They don't have the training, advanced licensing, or experience necessary to understand markets. I have been saying since 1995 that banks and insurance companies are poor money mangers. Now we all know this. I would rather put that money in a Roth IRA if the money they have is NOT from a 401(k) or existing qualified retirement plan. I would be looking at FDIC insured short term (under 1 year, pref 3-6 months and roll them) CD's, or Treasury Inflation Protected Securities (TIPS). http://www.treasurydirect.gov/indiv/prod… I was insurance licensed since 1995, "retired" from this end now.

Question: What are the main differences between an annuity and a scheme pension? Why do some people object to purchasing an annuity? Also, is it compulsory to purchase an annuity upon reaching the age of 75?

Answer: A Personal Pension Scheme (PPS) (UK) http://en.wikipedia.org/wiki/Personal_pe… Annuity http://en.wikipedia.org/wiki/Annuity_%28… I don't know what the rules are for annuities in the UK.

Question: What's the difference between an annuity and a regular mutual fund as far as retirement? A friend of mine said that my investment "adviser" will make a KILLING on an annuity if I open one up; plus, I have to be in this annuity for something like 8-10 years before (decreased fees or something??) occurs. I'll be transferring around $260k from another brokerage house to my "adviser." This same friend thinks I need to stick with mutual funds... when you compare the two investment vehicles, their difference in total return over the last 12-15 years isn't that much difference (but that there were tax benefits or something with one or the other). Any help?

Answer: There is no simple answer . . . that's why you are having problems deciding. Remember, the guy selling an annuity will be collecting a whopping fee . . . perhaps as much as 12.5% of your assets. The fee will be hidden in all sorts of ways and NOT fully disclosed NO MATTER WHAT he tells you. STICK with your mutual funds. Your friend is RIGHT! How do I know? . . . I bought an annuity from NY Life, a reputable company, and only found out about the fees by pouring over the delivered document . . . but not in time to get my money back. I've still got the annuity, but have NEVER put another nickel into it. Worse, the salesman was a friend, and he really didn't know how to calculate the fees. He agrees that they are much steeper than he thought . . . he only got about 1/4 of the fees himself, but even that was near impossible to compute.

Question: If you bought an annuity for 100K and decided to close it are their tax consequences? Interest was recieved monthly and claimed on taxes. The value of the annuity is less then what they purchased it for.

Answer: If you paid all your income taxes on the interest then all your interest is not taxable when you with drawl, thanks to the no double taxation laws. Assuming you do not owe taxes on the principal amount before you put the funds into the annuity then you will not owe any when it comes out.

Question: What rate of return i built into the annuity? You just won the state lottery. the state gives yo the choice of $1 million today or a 20 year annuity of $75,000 starting one yer from today (assume both are after taxes). what rate of return is built into he annuity equation usd? equation used?

Answer: Doing your homework on Christmas Eve...and asking others for the answers? It may be coal for you tomorrow. Seriously though, why not follow the example in the textbook and see if it matches the other answer. If it doesn't, post your computations so we can critique your answer. It won't do you any good at test time if you don't know how to do it.

Question: If I have a deferred annuity, can I roll it over to a new deferred annuity without a tax penalty? I want to close out my account with a firm, so I would like to "roll over" my deferred annuity to another financial institution. But I don't want to have to liquidate it and suffer an early-withdrawal penalty. Can I roll it into another deferred annuity?

Answer: The first question you need to answer is whether or not the Contingent Deferred Sales Charge has gone away or not. They usually last for 7-10 years depending on the company. If the account is "penalty free" then you could transfer the account to a different company. If the annuity is non-qualified, you can do a 1035 exchange into a new annuity. If it is an IRA or qualified plan, you could rollover the annuity into a new annuity or other qualified account. As long as you don't take possession of the money, there will be no tax consequences.

Question: Can you close an annuity trust account from ING and just incur a penalty? Can you close an annuity trust account. I do not need to keep the annuity account because I will not be putting money in to it. Can i just close it, incur the penalty and get my money back?

Answer: First of all, since it's a trust, you very well may NOT be able to close it, if you didn't set it up in the first place. Second, the penalties for closing an annuity, are pretty severe. You will have to call your insurance agent, or the company that holds the annuity, and ask.

Question: What will the financial crisis do to my lifelong annuity? I have a survivor annuity, which I receive a monthly deposit from, that I am supposed to receive until I die, but with the obvious failure of the bailout, and the cumulative degradation of the stock market, I am unsure as to what is going to happen to it. Is this annuity at risk, and, if so, what can I do to get it out of harm's way? Should I turn it to gold or something?

Answer: sometimes there are guarantees in annuities. Is it a variable one that is in the market? Who is it with? You can get a lump-sum immediate annuity with a guarantee in it that makes it immune to what the market does.

Question: How much of annuity payments must I include? I purchased a 20yr annuity for $20,000. I will receive payments of $370 each month of annuity's life. How much of the annuity payments must be included in my 2009 gross income? I received all 12 payments this year. Also, how much of these annuity payments may be excluded from gross income?

Answer: Your annuity provider is required to send you a Form 1099-R. It will show the gross amount that you received and the taxable amount as well. If you didn't receive a 1099-R, call the company and request one. You can exclude from taxable income the portion of the payment that is your own money coming back to you. I THINK that the tax-free amount would be $1,000 per year--but you need to get the 1099-R to be sure.

Question: What is the best pension plan to buy ANNUITY in India? What are the returns on ANNUITY FOR LIFE? My contract with Ing visya best years has matured. Their returns are 3.5% with corpus return and 4,5% without corpus return ie annuity for life. I want to buy annuity from other insurance companies. Any suggestion?

Answer: LIC has better annuity rates. you should get 6-7 % if choose no return option. Private companies do not offer good return.

Question: What about keeping principle from an annuity? Is there a product that could keep the principle from an annuity while receiving a liftime payment for a joint account of a 76 and 80 year old? I am trying to find out about annuities, have studied quite a bit but can't find that specific answer. Thanks.

Answer: Once you start taking annuity payments, (either by purchasing an immediate annuity or annuitizing a deferred annuity contract, both of which were issued by a life insurance company), you give up the right to the principal. If you are doing a joint lifetime annuitization, once the last joint tenant passes away, the annuity payments cease. If both people pass away relatively soon, then the insurance company makes out because they get to keep the principal. However, if one of the tenants live pass their life expectancy, the insurance company has to keep paying. The only way you could get any principal back after annuitizing, is by requesting what's called a cash refund option. You would have to do this before you start taking payments. What this will do is reduce the amount of income received from the annuity, but if both tenants die earlier than expected, than a beneficiary would inherit the remaining portion of the principal. Basically, if I understand your question, there is no product that does what you're looking for.

Question: How much must you invest today in order to have your retirement annuity if the annual interest rate is 6%? You plan to retire in 15 years, and you want to have an annuity of $50,000 a year for 20 years after retirement. You want to receive the first annuity payment at the end of the 15th year from today.

Answer: This is a 2 part problem. We work backwards to find the answer. First we know we want 50,000 a year for 20 years at 6% interest rate. Looking in my annuity table, I find the I have to divide 50,000 by 0.08718456 giving 573,496. Now again working backwards and again looking in the annuity tables but in a different table this time, I find that I have to divide 573,496 by 23.2759699 giving 24,638.98. That is the amount you have to invest each year for 15 years. I am not sure if that is your question or whether the question is what lump sum what you have to invest today in order to obtain the specified result. In the latter case you would need to invest 573,496 * 0.41726506 = 239,300

Question: What is a tax exclusion in regards to an annuity? Can someone please explain to me what a tax exclusion means in regards to an annuity? If an exclusion results in a final figure, how is it calculated? Thanks very much!! Sorry, I should have mentioned I am a 1/3 beneficiary of the annuity.

Answer: Take all the paperwork into a H&R Tax office. They will calculate what it means to you and explain everything. There is no charge unless you file with them. It will only take a few minutes and they will be glad to help make things more clear for you. I would need to see your 1099R or the back up paperwork to answer you question. good luck

Question: Which option did you initially choose, cash or annuity? How were your winnings affected by the cash option? Review the Time Value of Money simulation. Which option did you initially choose, cash or annuity? How were your winnings affected by the cash option? How did this compare to the annuity option? If you won the lottery today, which option would you choose and why?

Answer: Cash option. That way all taxes are paid and the money is mine to do with as I please. Taking the annuity causes many challenges to your heirs when you die. They must pay the entire tax bill at once.

Question: What are good points and bad points to a variable annuity? A financial advisor what me to take a tax differed account I have and roll it over into a variable annuity account. Is this good or bad. Does it matter that a get a lease an 8% return on my money?

Answer: The bad points are the high fees and taxes when you take it out. And no stepped up tax basis for heirs. I dont know any good points.

Question: How does someone get a annuity in lump sum when they are incarcerated? My husband received a inheritance fixed annuity. Can I delegate getting lump sum? He is currently incarcerated. He aquired inheritance 5 years into a 12.5yr sentence. I cannot afford legal counsel.

Answer: have your husband give you power of atty status call his lawyer that defended him he can help you this should have been done before he was incarserated it will make you life alittle easier

Question: How much money do you need to invest in an annuity? At the age of 55, how much money (pounds sterling) would you need to invest (and in what) to guarantee you an annuity of a reasonable amount to enable you to survive, let´s say the next 30 years or so?

Answer: Good times is absolutely right. Everyone gives annuities a bad name when in reality they are talking about the Variable Annuities. I wish they'd educate themselves on all of the benefits of Annuities especially for retirees and seniors. No management fees, no risk of loss, and pretty great interest rates compared to banks these days. Avoids probate, tax deferred, flexible, ... I could go on and on. How bad can they be when that is what most companies use to provide monthly income for the rest of your life for retirees, and the lottery uses them for your lifetime payout. Finally someone else on this site that gets it. Nice advise goodtimes. Anyway... Tough question to answer not knowing your bills and how much money you need to live on. Most of my clients can live off monthly about $200K and live very well for the rest of their lives by turning it into a monthly income.