It’s never too early to start thinking about retirement. Fortunately, there are several different ways to build your nest egg over time. Investing in a life insurance annuity is one method worth considering. There are some great advantages to this low-risk investment tool.
It doesn’t matter how old you are now; one day, you will retire. No matter when you enter retirement, your living costs will be covered if you made the right decisions financially. To find out how a life insurance annuity can benefit you and get personalized assistance with all of your retirement needs, contact an Insurance Station agent today.
Life Cycle of Life Annuities
ü An annuity is a contract between a trust maker (you) and the insurance company.
ü You pay multiple premiums or one lump sum into the account which gains un-taxed compounded interest.
ü At a date determined by you, the insurance company issues income annuity payments to you.
ü In most cases, you can also choose a beneficiary to receive proceeds from your annuity upon your passing.
Introduction to Life Insurance Annuities
A life insurance annuity is for anybody who needs to start saving for retirement or create a secure income. When you invest money into this product, you have a guaranteed lifetime income. This can be a huge advantage when compared to other retirement products and investment vehicles.
There are several people who will be involved in your purchase of a life annuity. You will have an issuer, who holds your life annuity account. You are considered to be the “annuitant,” and you can add other annuitants to your policy. Most likely you will also want to add a third party as a beneficiary, particularly if you think the annuity life will extend past the date of your death.
Many people choose annuities because of the tax savings on investments and federal estate taxes. The premiums that you pay are invested by insurance experts, in a tax-deferred account, to help you meet your financial goals. The beauty of a life insurance annuity is that it works for many types of people.
Who Needs Life Insurance Annuities?
Life insurance annuities can meet a range of needs and financial objectives. For example, one type of annuity product is a life insurance irrevocable trust, which can be a great tool for property protection and federal estate tax savings.
For people with a significant amount of income and property to protect, annuity products can provide the tax savings they need and the safety net of a guaranteed income no matter what. Members of the middle class may choose annuities as an investment because of the ease of use and guaranteed income that won’t end during their lifetime.
A life insurance annuity even works for young people who have no estate to protect but want to start saving for retirement. If you are still young and are looking for ways to create a nest egg, time is on your side and now is as good a time as any to start building up some annuity cash.
Life Insurance Annuity Terms and Definitions
Lifetime Annuity: A retirement investment product that you fund with multiple premiums or one lump sum of money that is invested and then paid out to you immediately or over time.
Single Premium Annuity: An annuity account that is funded by a lump sum. Minimums may apply.
Immediate Lifetime Annuity: An account that provides payment as soon as a lump sum of money is deposited into the account. The remainder of the money is invested for future annuity payments.
Deferred Lifetime Annuity: An account that is funded by one lump sum or multiple premiums. Payments are issued on a predetermined future date.
Deferred Variable Annuity: An annuity account that will accumulate value based on your choice of an annuity variable like a stock or bond. With this annuity, you purchase multiple variables. Variable annuity performance can fluctuate, and therefore it is regarded as a riskier investment. Payments will be issued on a specified future date.
Fixed Annuity: An annuity account that guarantees a fixed rate of return because premiums are invested in low risk assets.
Single Premium Deferred Annuity: A deferred annuity funded by one lump sum, which will begin to provide payments to the account holder on a specified future date. Single premium deferred annuity rates of gain may vary with investments.
Single Premium Immediate Annuity: An immediate annuity funded by one lump sum cash installment, which will begin to provide payments to the account holder as soon as a lump sum is made. Single premium immediate annuity rates of gain may vary with investments.
Joint Life Annuity: This vehicle is normally used for married couples. It is an account that has multiple annuitants and will make payments until the second death. Payments normally stop after the death of both spouses; however, you may also have the option to transfer the annuity to one or more beneficiaries.
Refund Life Annuity: An account that will pay annuity income until the annuitant dies. After that, any remaining annuity balance is paid to the named beneficiary.
What Is Annuity Income?
Annuity income is the money you receive from your life insurance annuity account. When opening an account, it’s a good idea to have a clear picture of the amount of income you will need to live comfortably. Remember to adjust for cost of living inflation.
Work with a knowledgeable agent to choose the right vehicle for your income needs. For example, you may want a deferred annuity if you are doing long range planning for your future, as they have more time to build wealth. However, if you need income now or you know you will soon, an immediate annuity may be an excellent option for you.