First Financial Resources

Benefits of Annuities

Annuities offer a stable and guaranteed interest-bearing income stream. That can
be incorporated into financial planning. Annuities are particularly suited for
retirement planning and retirement savings.

Your principle investment is protected. The funds invested in an annuity are protected by strict state laws requiring the insurance company to maintain cash reserves equal to the withdrawal amount of the annuity.
You get a guaranteed minimum rate of return, so you can count on receiving a definite amount of money in the future.
You don't pay taxes on your interest earnings until you withdraw the money from the annuity.
You preserve medicaid eligibility: once your funds are "annuitized," the money is no longer included in the government's formula for determining Medicaid eligibility (subject to federal and state guidelines). Often, when faced with major health care costs, many seniors today are forced to "spend down" their assets -- they spend their life savings on health care until their assets are reduced to a specified minimum level. Only then do they qualify for Medicaid. With an annuity, it may be possible for you to keep your money and receive the government assistance you deserve.
Maintain liquidity. You control how much money you withdraw and when you withdraw it.
Avoid Probate. Upon death your funds pass directly to your named beneficiaries. There are no delays, no publicity, and no costs.

One annuity ideally suited for affluent seniors is the (Age Rated) Single Premium Immediate Annuity (SPIA) with a life income option. This type of annuity provides a guaranteed income for life in exchange for a single premium payment. The payouts are typically higher than many other classes of annuities because the income payments will cease upon death. Age rating the annuity also maximizes payout due to the fact that the insurance companies take into account current health conditions. You can also elect to guard against the effects of inflation by annually increasing the payment you receive at a compound rate of 1% - 7%.

What Is An Annuity?

Tax deferred annuities are contracts that are issued by insurance companies that offer a guaranteed rate of interest and guaranteed payout options. Interest earnings inside of annuities grow on a tax deferred basis unlike other investments. Taxes are paid only when the money inside of the annuity is withdrawn. There are several advantages of tax deferred annuities. Annuities offer very competitive returns that exceed CD's, money market and savings accounts. Unlike other investments, these competitive returns are sheltered by taxes for as long as the earnings remain inside of the annuity.

CD Type Annuities

Credited interest rates in these products are guaranteed for the entire term. Terms vary anywhere between 5 and 10 years for most products. These annuities have gained in popularity this year as people are seeking guaranteed rates for periods exceeding one year.

Equity Indexed Annuities

Credited interest rates in the contracts are based on an index such as the S&P500, Dow, Nasdaq and 10 year treasury bonds. These annuities have gained popularity quickly as many investors are attracted to the possibility of stock market returns on a tax deferred basis without the stock market risk.

Fixed Annuities

Single premium annuities that offer several payment options to the contract holder that currently offer competitive rates of interest and in some cases bonus rates of interest.

Asset Allocation Annuities

Relatively new in the industry but one of the most popular today. These annuities have several investment options inside including a fixed interest rate option. These annuities permit investors to split up their money into different options. Investors seeking high returns while minimizing risk find the diversification features attractive. Great for 401(k) rollovers.

Flexible Premium Annuities

Perfect for investors who want a tax deferred investment that they may systematically add to on a consistent basis. Suitable for either traditional or Roth individual retirement accounts.

Bonus Annuities

Annuities that offer bonus credited rates of interest usually in the first few years of the contract in addition to the current stated rate of interest. In some cases the additional bonus rate can exceed 7%. It is not uncommon for people to experience better than 14% in the first year with certain policies. Also very suitable for retirement plan rollovers.