1. WHAT IS AN ANNUALITY?An annuity is a contract through which an insurer makes a series of payments on your income at regular intervals in return of a premium or premiums that you have paid previously.
Annuities in many occasions are bought to generate income for the years of future retirement. Only one annuity can pay income that is guaranteed from for life. Your money increases without having to pay contributions as long as you keep the same within the annuity.
2. EXAMINE THE DIFFERENT TYPES OFANNUITIESThe most common types of annuities are single or multiple premiums, immediate or deferred and fixed or variable.
For a contract simple premium, you make a single payment to the insurer, instead of making a series of payments for a multiple bonus. With an annuity immediately, the payment of income will begin later than one year after having paid the cousin.
The income payments of an annuity deferred usually start many years after. Deferred annuities have an accumulation period, which consists of the time since when you start paying premiums and when income payments begin. During said period of accumulation of affixed deferred annuity, your money, less any applicable charge, generates interest at the rate of interest that the insurer establishes or that is established in the annuity contract.
During the disbursement period, the amount of each payment of income payable to you, generally establishes when said payments they start and are not subject to change. During the accumulation period of an annuity variable, the insurer places its premiums, less applicable charges, in a separate account.
You decide how the insurer will invest these premiums, depending on how much risk you you want to take over During the disbursement period of a variable annuity, the amount of each payment of income to you may be fixed (established at the beginning) or variable (changing according to value of investments in the separate account).
3. KNOW HOW THE FEES ARE ESTABLISHEDOF INTERESTDuring the accumulation period, your money, less any applicable charge, generates interest based on rates that change of time in weather. Usually the applicable interest rates the insurer establishes them.
The prevailing rate is the one that the insurer decides to accredit to your contract at a particular time. The insurer will ensure that the rates will not change for a specific period. The rate of minimum guaranteed interest is the lowest rate that will generate your annuity.
This rate is established in your contract. Some annuity contracts apply different interest rates to each premium that you pay or premiums that you pay during different periods. Others annuity contracts may have two or more accumulated values that finance different benefit options.
These accumulated values they will be able to use different interest rates. You will only receive one of the accumulated values, depending on the benefit you chose.
4. KNOW THE CHARGES THAT COULD BERESTS OF YOUR DEFERRED FIXED ANNUITYMost annuities contain charges related to its cost of sale and administration. These charges may be subtracted directly of the value of the contract. Request that your agent or insurer will describe the charges applicable to your annuity. Some examples of these charges are, fees and contributions for charges delivery or withdrawal, withdrawal without penalty, fees contract, fees per transaction, percentage of premium charge and premium contributions.
5. CONTRACTUAL BENEFITS OFDEFERRED FIXED ANNUITIESInsurers can offer several options for the payment of income. You or someone else appointed by you can choose the option. If you choose Life Only ("Life Only"), the insurer will pay income while you live. An Annuity of Life ("Life Annuity") with Period Certain ("Period Certain") pays income while you are alive and guarantee making payments for a fixed number of years still in the eventuality of his death. If you choose the option Count ("Joint") plus Survivor ("Survivor"), the insurer will pay income as long as you or your beneficiary are alive. In some annuity contracts, the insurer may pay a death benefit to your beneficiary if you die before payments begin income.
6. CONTRIBUTION OF ANNUITIESUnder the current federal law, annuities they receive special tax treatment. The payoff contributions on annuities is deferred. which means that you do not pay contributions on the interests that generate your money while you keep it in the annuity. An accumulation of deferred contributions it is not the same as a free accumulation of contributions.
An advantage of differingcontributions is that the low contributory rate, which you pay your income when you receive the annuity income payments, may be lower than the applicable rate during the accumulation period. You will also be generating interest on the amount that you had paid in contributions during the accumulation period.
Most laws of contributions on annuities of the States take as their basis the federal law. You should consult with an expert or professional in contributions to understand your situation individual contributory
7. TAKE ADVANTAGE OF THE PROVISION ONFREE EVALUATION ("FREE LOOK")Many of the states have laws that provide an established number of days to review the annuity contract after your purchase. Yes, you decide during that time that you do not want the annuity; you can return the contract and get a refund of all your money. This is usually referred to as the period of free evaluation ("free look") or right of return. This period must be expressed particularly and prominently in his contract. Be sure to read your contract carefully during that period.
8. IS THE FIXED ANNULLITY DEFERRED? CORRECT ALTERNATIVE FOR YOU?You must weigh what the objectives are that you have about the money you invest in an annuity. You need to analyze how much risk is willing to take with said money.
Ask yourself the following question: How much income you will need at the time of your retirement in addition to what you will receive from Social Security and your pension? Will you need that additional income? Just for you or for you and others? How much time can leave money in the annuity and if Annuity allows you to withdraw money when need?
9. SOME QUESTIONS THAT YOUR AGENTSHOULD BE ABLE TO ANSWERSome questions you should ask your agent are: Is the contract a simple premium or multiple? What is the initial interest rate and for how much time is guaranteed? What is the rate of minimum guaranteed interest? Could I get a partial withdrawal without having to pay fees for rescue or other charges and if there is a benefit for death?
10. REVIEW YOUR CONTRACT VERY CAREFULLY
Before you decide to buy an annuity, I should review the contract. The terms and conditions of each annuity contract vary. Ask the agent and insurer for an explanation of any point that you do not understand. Do this before the period expires of free evaluation ("free look"). Compare information on similar contracts offered several insurers.
Compare products can help you make a better decision. If you have specific questions or cannot get the Necessary answers from your agent or insurer, Contact your Department or Office of the Insurance Commissioner of your state