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A Fixed Annuity Offers You Many Protection

Asset protection is an important consideration when deciding on retirement investments. One investment of particular interest to retirees is the annuity. Annuities are geared to protect you from running out of income while you’re living.

But because a fixed annuity is an insurance product, it has special protections that have been afforded to insurance products over the years. So, beyond protecting a lifetime income for you let’s, summarize some other protections that a fixed annuity offers you.

*Fixed Annuity Asset-type Protections:

A fixed annuity offers you asset-type protection. Insurance companies are well-regulated and must guarantee that they can make the payouts they promise. So you can be well-assured that your annuity investment will not disappear on you.

Also, annuities are generally not liable to attachment or garnishment in favor of any creditor of the person insured under the contract. So this gives you some lawsuit protection for your annuity investment.

Because your annuity is a contract with an assigned beneficiary, if it’s a fixed term annuity or a survivor annuity, it gives two protections when you die. They are protection from

1. The probate process: Your annuity investment transfers immediately to your beneficiary. This minimizes costs associated with probating this money, avoids its characteristic delays, and keeps the transfer of this money private – another privacy feature.

2. Contestability: No one may contest your decision as to who will receive your annuity investment at the time of your death. Asset subject to your will can rightly be contested.

*Protection of an assured income until you die:

Not knowing when we’ll die means making sure we arrange our finances to produce income for as long as we live. Aside from being able to live off just the earnings of our investments, only social security and annuity can pay you a lifetime income.

Insurance companies use the premiums of thousands of its annuity holders, those premium earnings, and the statistics of mortality to assure everyone a lifetime income from their life annuity.

Because of the nature of mortality rates, beginning your annuity payouts later means your monthly payout increases for the same investment (premium) amount since there’s less chance of you being around to collect it all. So, the longer you can hold off from beginning your annuity payouts, the less investment premium you need to achieve the same monthly payout. If you have a joint and survivor annuity, two lives are used in the calculation and the amount of the payout is smaller than with a single life contract.

Because fixed annuities offer guarantee of principal and an interest, you’re protected from the loss in principal and earnings that stock and bond market investments are vulnerable to. So you’re immune to market fluctuations.

*Protection from refusal:

Unlike life insurance, you generally don’t need a health exam to buy an annuity. Life expectancy for annuity payout purposes is determined by insurance company experience and not as a result of a physical examination.

*Protection from excessive taxation:

Annuities are generally bought with after tax money – premiums. Only their earnings of these premiums are taxed. But the tax on those earnings is deferred until you withdraw that money as your annuity payouts. That allows those earnings to more effectively compound for better growth.

Lastly payouts are not considered as first made out of earnings which would make them heavily taxed up front. In fact, each monthly payout is divided between a return of your premium and some of your earnings. The taxable apportionment is based on the fraction of earnings to all your premiums plus earnings. So it can be quite small.

For qualified annuities that allowed contributions to be deductible – as for an IRA -all of each payout will be taxable income and payouts must comply with IRA minimum required distributions after your turn 701/2.

hane Flait helps you with your financial legal, tax, and retirement goals.
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Thita Triena
Image by TimWebb
Built 1961, Goole Shipbuilding & Repairing Co. Ltd, Goole, UK (Yard No. 515) as ANNUITY
GRT: 1599/ DWT: 2385
Length Overall: 81.6metres x Beam : 12.3 metres
1 screw : Service Speed 10.0 knots
Engine: Newbury Diesel Co. Ltd., Newbury : Oil 4cyl 2SA (as built)
1975 : Re-engined with Two (2) Mirelees Blackstone Ltd engines 8 cyl 4 SA oil engines

1987: JET VI

2011: Broken up at Aliaga.

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