Over the past few years, saving money for your future has become increasingly complex. Today, you need to balance a wider range of issues than ever before; from income distribution strategies, tax law changes and even how working will affect your Social Security benefits.
When combined with the fact that people are living longer than ever — making it more expensive to maintain your current lifestyle — you quickly see why a solid savings plan has become so critical.
The Amwell Agency can help with the foundations of saving for your future, to present possible strategies to secure a comfortable standard of living and ways to create an income stream for the rest of your life. There are also innovative strategies that incorporate the use of fixed annuities to achieve your goals.
We can help you understand what issues are important to consider, what mistakes you can easily avoid, and what options you have to maximize and protect your assets.
What are Fixed Annuities?
An annuity is one way to put money in an insurance company. Much like a CD at a bank, a fixed annuity is a contract which offers a guaranteed return of principal and interest at a specified future date. Once these contracts reach maturity, there are several distribution options including a lifetime income stream.
The main advantage annuities have over bank CDs is that your money accrues on a tax deferred basis. The interest accumulation inside an annuity is not taxable until withdrawn which results in a substantially larger contract value than other taxable savings vehicles.
Fixed — The money inside a fixed annuity accrues interest at a specified rate that was declared when you purchased the contract. Interest rate guarantees range from 1 year to as many as 10 years, depending on the insurance company and the product offered. Most contracts contain a guaranteed minimum interest rate that your money would receive in a worst case scenario. The insurance company also guarantees your principal and in some cases, may offer the option to purchase a guaranteed lifetime income rider.
Fixed Indexed — Indexed annuities are annuity contracts that provide guaranteed protection of principal and guaranteed payout options. They also promise an interest rate that may be based on financial index values or a declared fixed interest rate. This type of annuity also may offer the option of purchasing a guaranteed lifetime income rider.
Free Withdrawals — Most companies allow a certain percentage of your contract value to be withdrawn annually without penalty depending on the particular contract. This potential withdrawal can typically be up to 10% of the contract value, but it can be higher or lower depending on which state the individual contract was issued. In addition, many annuity contracts may provide a long-term care/nursing home rider which states that if you are confined to a nursing home for a certain period of time, you may be able to withdrawal all of your funds penalty free.
Remember, “People don’t plan to fail, they fail to plan.” The use of the above annuity contracts can help you reach your goals and can help protect your money that has been set aside for your future.