As America grows older, more investors are interested in accumulating money for their retirement. If you're one of those investors, you should consider the advantages of tax-deferred annuities. An annuity is actually an insurance contract that provides you with competitive interest rates, tax-deferred earnings and flexible withdrawal options. With an annuity, you pay absolutely no income tax on the interest your money earns as it accumulates. Because of this tax-deferred growth feature, annuities will outperform other investment instruments paying the same or even higher, but currently taxable, interest rates. What is a Variable Annuity? A variable annuity is an insurance contract between an individual and an insurance company which can contain several investment portfolios. After you invest in a variable annuity, it can grow, tax-deferred, until you decide to take distributions; usually in retirement, when your income needs are greatest. As a result, variable annuities give you the flexibility, diversification and growth potential of mutual funds; and the power of tax deferral over time. More and more people are recognizing the unusual mix of benefits that variable annuities offer. The variable annuity market has witnessed explosive growth over the past seven years. Variable annuities can be appropriate for a wide range of investors. Younger people may be drawn to a variable annuity because they are able to purchase early and take greater advantage of tax deferral over the longterm. For investors near retirement, variable annuities are also an excellent choice. Not only do they offer a variety of distribution options, they also help keep retirees a step ahead of inflation. This is possible because, even when an investor begins drawing an income, the balance of an annuity remains invested and can continue to grow. Other advantages of variable annuities apply to all investors, young and old. Because a variable annuity is tax-advantaged, dividends and capital gains compound without taxes until you withdraw the money; much like an IRA. And, like a nondeductible IRA, when you begin withdrawing the money for retirement, only the annuity earnings are taxable, not the money you invested. Annuities do not limit the amount you can invest to $4,000 each year. When you do decide to take income from your variable annuity, you can choose among many distribution options. For example, you can receive payments in installments over a time period that you select, or you can receive payments for your entire lifetime. And, because your payments are split between your principal (nontaxable) and interest (taxable), tax consequences are spread out over time. Through a variable annuity, you also gain immediate access to an investment company's professional management, research of global markets and commitment to long-range goals. As a result, you can enjoy far greater opportunities here and around the world than you could achieve on your own. ALL ANNUITIES ARE NOT ALIKE There are a variety of factors you should carefully consider when you purchase annuities. QUALITY Although annuities are fully guaranteed by the issuing insurance company, some companies offer a stronger guarantee than others. So, it's important for you to consider the current financial strength of the company and its future potential. There are a number of independent rating organizations that can provide you with this information. Annuities are obligations of the issuing insurance company, and are not insured by the FDIC. RATE Many insurance companies offer high initial rates to attract investors to their annuities. Since deferred annuities are long-term investments, you should know how long the rate is guaranteed and whether it is competitive with other offerings. SINGLE OR INSTALLMENT PREMIUMS. You may choose to pay your premium in a single lump sum or installments. "Flexible" installments allow you to make payments whenever you wish while "scheduled" installments specify the size and frequency of your premiums. This means you can tailor your premium payments to fit your budget. PROVISIONS There are a number of other provisions that you should consider: Withdrawal Provisions Most deferred annuities allow you to withdraw a portion of your investment with no penalty. (If you withdraw money before age 59 1/2, you may be subject to certain tax penalties.) Surrender Charges If you withdraw more money than is allowed by the withdrawal provisions, the "excess" will be subject to a penalty or surrender charge. Generally, surrender charges are expressed as a percent of the excess dollar amount and decrease over a period of time. "Bailout" Provisions If your rate drops a certain percent below your initial rate, some insurance companies will give you the opportunity to "bailout." No surrender charges are levied under these circumstances. No Probate Costs Should the annuitant die before annuity income payments begin, the beneficiary will receive the full value of your account with no penalty whatsoever. There are no delays or expenses of probate involved. No Deposit Restrictions Unlike an IRA (which limits your eligible retirement contributions to $4,000) annuities have no maximum deposit restrictions. Listed below is a listing of the variable annuity companies that we do use.
AIG / American General Life Insurance AIG / Anchor National Life/Sunamerica Allianz Life Insurance Co of North America Allstate / CIGNA American National Insurance American Skandia LIfe Assurance American United Life Assurance Company (AUL) Ameritas Variable Life BMA (Business Man Association C N A Investor Services Delta LIfe Annuity Equitable Life Insurance Company Fortis Benefits Inc. GE Capital Assurance General American Life Great-West Life Hartford Life ING / Northern Life Annuity Integrity Life ( Touchstone) Jackson National Life John Hancock Kemper / Zurich Annuities Investor Life Insurance Company Lincoln Benefit Life Lincoln National Life Manufacturer's / MFS / Sun Life Of Canada Manulife Financial Metlife Investors Nationwide Life Insurance Company Nationwide / Provident Mutual Life Ohio National Life Pacific Fidelity Life Pacific Life Phoenix Home Life Pioneer Preferred Health Systems Principal Life Insurance Providian Mutual Life Safeco Life Insurance Security Benefit Transamerica Insurance & Investments Travelers Insurance Inc. United Mutual Of Omaha Union Central Life US Financial Life Western Reserve Life