Annuity IRA confusion is very common with new clients. The debate goes on and on between financial professionals. Interestingly, a lot of financial reporters are also debating on the subject. We are only going to focus on the positive or what are the benefits to owning an annuity IRA?
Some basics, even the question can be confusing. Should you put an annuity in an IRA or should you use an annuity for your IRA account? An annuity IRA is actually an IRA that is invested in an annuity. An IRA is a special kind of retirement account and the annuity is what the account is invested in inside of the account. It can be confusing because the IRA account can be opened at the same place that the investment is held which makes it seem like the same thing. So an annuity IRA is just a retirement account opened at the insurance company.
Should an annuity be in an IRA? What are the benefits?
The short answer is yes! But that doesn’t really help. There are so many benefits that for now we will just look at one of the great ones.
Principal and income guarantees are the main reason to use an annuity IRA. Most insurance companies are offering some incredible guarantees that were not available several years ago. My favorite is the income guarantee. The income rider guarantees a certain amount of income to be available from the moment of putting the investment in. If you don’t take any money out it gets even better and you do not lose access to your principal.
The process begins by creating an extra account that is used only to calculate an income amount and not for cash with drawls. Think of it like an extra benefit not a cash account. The insurance company will guarantee a certain rate of increase, maybe 7%, and your extra account value goes up by that amount each year that you do not take money out. For your annuity IRA this is a fantastic benefit but there is a catch – the 7% ends when you start taking money out and to keep the guarantee they have limits, maybe 4.5% per year of the total extra account value. The good news is that your original account can easily surpass this extra account and when it does you would just take income from that and forget about the extra account.
What is the benefit? You are guaranteed that you will have a certain amount of income at some point in the future no matter what the market does or how interest rates perform. So no more worries about how you will outlast the storm of the bad economic conditions. No more financial worry at all really, just takes your income and live your life. This provides a worst case guaranteed scenario that is actually a good case scenario and not bad at all.
Guaranteed income lets you relax and can also let you earn more money because now your other money can be invested for growth because the safety and income portions of your portfolio are taken care of for the remainder of your income needs and possibly even your life. One idea that I use a lot is to invest enough of your main nest egg to provide adequate guaranteed income to cover your expenses. Then invest the rest of your investment money in conservative growth investments or I personally like real estate better but it is not right for everyone. No matter how the market performs you will always be guaranteed that your expenses and lifestyle will be paid for by your annuity IRA.
What does the income guarantee mean for your annuity IRA? If you invest in an annuity you could take the stock market roller coaster out of your investment plan for good. When your friends are losing money and wondering what they are going to do you can rest assured that you are protected and safe. You would have guarantees where they would not.
Annuities can be very beneficial. I like the income guarantees and no other investment offers a true income guarantee like annuities. An annuity IRA with the income guarantee can bring some financial peace to your life in the midst of any kind of economic conditions.
James Warden memorial, Charmouth churchyard
Image by Stoutcob
The inscription reads:
JAMES WARDEN Esq
Who fell in a Duel the 28th
In the 56th year of his age.
‘In 1783 on the death of Francis Phipps Henvill, the Manor of Charmouth was purchased by Lieut. James Warden R.N…
It is a puzzle how James Warden was able to afford Charmouth and also Langmoor Manor where he resided. It has been conjectured that it was from prize money for the nineteen Sea Battles he fought in. But the Will for his wife shows them owning considerable property at Wapping, near London.
He quarrelled with his son, whom he disinherited, and in his will left the Estate to his wife and upon her decease, upon trust, out of the rents and profits they were to pay to his son, William Weeks Wharton, £20 a year during his life by 4 evenly quarterly payments. But in case he should at any time sell, dispose of, or make away with or borrow money upon the said annuity. Then declared the bequest therof should be deemed void. The trust money was derived from Charmouth House property and other houses. It is interesting to see that the son was to live a long life and is still shown as living in his house in Charmouth when the Manor of Charmouth comes up for auction in 1854.
In 1789 James won an action against the Rev. Brian Combe and others for removing sand and seaweed from the beach.
His arguments climaxed with a disagreement with a neighbour, Norman Bond that resulted in a duel at Hunter’s Lodge Inn with James being shot through the heart and the neighbour fleeing the country to Barbados. The episode is recorded on the large tabletop tomb near the entrance to Charmouth Church. His Wife, Elizabeth, was to survive him by 7 years, but not it would seem broken hearted. For a letter turned up where the writer says that:
“Mrs, Warden welcomed and even courted her widowhood. She chose the pistols, thanked the gentleman who had lent them and made no effort to prevent the duel, although she lived close to a magistrate. In short she seemed determined that one of them should fall. If Mr, Bond, that her husband must be hanged, and if the latter, she was fairly rid of him”. She was to lease Langmoor to a Mr Dicken and move to Axminster where she was to spend her last years. ‘
"When Warden and Bond met in the street, an argument ensued in which Warden became extremely abusive and threatened to shoot Bond’s dogs," en.wikipedia.org/wiki/James_Warden
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