The Brief History Of Equity Annuities

If you are interested in the financial world and if you are trying to make an investment yourself then you may have heard about the term “equity annuity”. In truth, this type of annuities is quite recently added to the financial market and this is precisely what makes it so confusing for many people out there.

Equity annuities were first introduced back in 1998 by one company only. A bit more than a decade later, they have become extremely wide spread and the option of many people out there. Furthermore, they are sold by more than 40 life insurance carriers who deal with equity annuities.

Even if the beginnings of this new financial product were not as promising they are now, you can nowadays notice how billions of dollars go precisely into their direction every single year. As a matter of fact, the sales doubled only between 2003 and 2004 and they have been on the rise ever since.

Since senior investment fraud had become an issue in relation to equity annuities, the Securities Exchange Commission started working on measures that would offer seniors security against fraud when they buy equity annuities. In 2008, they managed to come up with a new rule that included the equity annuities and which meant that they are protected by the securities law.

This type of investment continues to be very much appreciated among the investors out there. Although it may appear risky, it is less risky than other types of investment and the profit one can get out of it can be significant. If you decide that you would like to invest in such annuities as well, then do make sure you understand everything about it. Read as much as you can on the subject and ask as many questions as you feel the need to.

Click on deferred annuities to learn more.

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The Main Pros And Cons Of Equity Annuities

The financial world may sound complex and confusing to some of you, but if you acquire as much information as possible, you will end up feeling a lot more comfortable. If you have heard or read about equity annuities and you would like to learn which are their pros and their cons, then do read on.

Equity annuities came into the financial world quite recently precisely to fill a gap between two major groups of annuities (fixed and variable). With this type of annuity, you both have access to things such as S&P 500 and the guarantee that your principal investment will return.

The main advantage of the equity annuities is related precisely to the fact that as an investor you have the guarantee that at least a part of your investment will return to you. At the same time, you can benefit out of the special features variable annuities usually have without that much risk. Of course, equity annuities can be risky as well, but compared to the variable ones, they are still better.

The main disadvantage of equity annuities investments is related to the fact that if you choose to surrender your annuity early, you can face quite a harsh tax penalty (which can rise up to 10%). Even more, the earlier you surrender the annuity (no matter the purpose, even if it’s a medical one), the more the surrender charges will be (and they can get as high as 20% out of the amount of money you invested).

Since this type of annuities is rather new to the market and since it combines two other types of annuities, it can be difficult to understand them completely. Before you jump into anything, make sure that you have understood everything and that you will pose any question you may have.

Pros and Cons of Deferred Annuities

Deferred annuities are investments made with insurance companies that will guarantee you a regular income in future. They work by paying a premium lump sum or several payments in the initial stage and waiting for a predetermined period to pass before payouts begin. The larger the amount of money you can pay as principal and the longer you can defer till the payouts begin, the larger an income you can look forward to. This kind of investment is very good for retirees who expect their living expenses to rise at some point in the future. They can take a portion of their retirement savings and put into this kind of annuity.

The investment is considered among the safest and most rewarding in the long term. The rate of return is often pegged against long term bonds. The income that is derived from your annuity is not only insured by the insurance company, but also to some extent by the government. This adds to the level of protection of your investment. Another benefit is that you get to defer paying taxes on your earnings until payouts begin. Naturally the longer you defer, the more earnings you retain that will accrue further as the years pile on.

Unfortunately this benefit can be cancelled if tax rates on your investments are raised in future when you begin to withdraw money from your annuity. Another downside that typically affects all kinds of annuities is the issue of surrender charges. If an emergency arises and you decide to make an early withdrawal, you will have to contend with hefty charges being imposed by the insurance company. If the annuity is also a longevity annuity, and you pass on and no arrangements have been made to cover your spouse, then the value of the annuity reverts to the insurer. It is not an inheritable asset you can leave to beneficiaries.

For more information please visit us at deferred annuities.

Basics to Equity Indexed Annuities

Annuities are an investment made with insurance companies. The money that is put in can be done so as a lump sum or as payment of several premiums. This investment will then be put into a variety of financial instruments that will depend in part on your choice of annuity. In equity annuities, the investments are typically stock market related. Equity indexed annuities are particularly popular as the rate of return is pegged on such indexes as Standard and Poor’s 500. They also however guarantee a minimum rate of return should the market suffer a downturn. This is a great way of securing your investment as you have the ability to benefit from the appreciation in market values and still remain stable when a downturn occurs.

Like other types of annuities, the income that accrues is tax deferred until withdrawals begin. If you decide to withdraw money before retirement age, then you can be charged and additional penalty by the revenue service in addition to normal ordinary income tax. In most cases equity annuities feature a deferred start date for withdrawals.  The value of the annuity is meant to accrue for several years before you begin to derive the income. Sometimes however an emergency may call for you to try and cash in on this investment early. No matter how legitimate the emergency, the insurance firm is certain to impose surrender charges that can be quite exorbitant. You also have the option of entering into joint life terms so that your spouse can be catered to from the annuity even after your death. If you prefer not to have a systematic withdrawal of your funds once the deferment period is over, then you can still take it all out as a lump sum. The contracts to annuities are often complex and you should consult with an independent financial advisor to help you understand what you are getting into.