Annuity Life Insurance Quotes


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Annuity Life Insurance Quotes

An Annuity is a retirement investment account set up with an insurance company. The investor pays premiums that the insurance company invests, accumulating interest on a tax-deferred basis. At some point (often after age 59.5), the investor can begin withdrawing money from the annuity.

There are many types of annuities. Some include a survivor benefit, paid out to beneficiaries after the investor’s death. Others expire on the investor’s death and don’t pay anything to survivors. Annuities without a survivor benefit tend to pay a higher rate of return.

Fixed annuities are lower risk investments that pay a "guaranteed" rate of return for a specified time period, and are adjusted for inflation down the road. Rates of return tend to be comparable to those of certificates of deposit and other low-risk assets.

Variable annuities are invested in higher yield, higher risk funds. They are similar to mutual funds, but are managed by the insurance company. They tend to pay a higher rate of return over the long run. The investor can usually select from a variety of different types of funds offered by the insurance company.

What Annuity Life Insurance Is Not

An annuity isn’t really insurance, although many annuities do include some type of death benefit. Life insurance typically pays out only on the insured’s death. Annuities begin paying out while the investor is still living.

Annuities share some things in common with mutual funds, but the key difference is that accumulated interest in annuities isn’t taxed until it is withdrawn, whereas mutual funds are taxed year by year. Annuities without a survivor benefit tend to pay higher rates of return than comparable mutual funds, due to the possibility of the investor’s premature death.

Unlike an IRA, there is no maximum contribution to an annuity and no mandatory time frame for withdrawal.

Who Needs Annuity Life Insurance Quotes?

Annuities are common among people who don’t have a company-sponsored 401k or other type of pension plan. They are also popular with people who have maxed out their IRAs and 401ks, and want additional tax-deferred retirement benefits.

Those who are already retired, but who want additional retirement benefits, are also likely candidates for an annuity.

Professionals who are in occupations likely to be sued for malpractice (like doctors, attorneys, and CPAs) sometimes favor annuities if they live in states that protect annuities from creditors.

Things To Think About

The most important consideration is the financial health of the insurance company. Annuities are only as good as the insurance company that offers them. Even though the company says the payouts are guaranteed, they really aren’t if the company should fail. Annuity investments are not protected by the FDIC.

There are often a lot of fees associated with annuities: commissions, management/administration fees, surrender benefit fees, etc. Many annuities charge little up front, but have substantial backloading fees when the annuity begins paying out or when it terminates. It’s important to read the prospectus very carefully to understand any costs and penalties associated with early withdrawal. The IRS code specifies a 10% penalty for withdrawing from annuities before age 59.5. In total, annuity commissions and fees tend to be in the range of 1.5-2% of the value of the annuity.

Talk to your agent to discuss which type of annuity insurance is best for you: one with or without survivor benefits, a group or individual annuity, fixed or variable, temporary or until death, etc.

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