Brought to you by William Scott
Scott Financial Solutions
Your Wealth Preservation Experts
Fixed annuities features are very similar to a CD’s, offering a guaranteed rate of return over a set period of time. If you invest a lump sum of your money over a particular period of time, you will receive a guaranteed rate of return back when that time is up. Typically, the longer you’re willing to invest your money, the higher your rate of return will be.
Benefits of a Fixed Annuity
Many people like fixed annuities because they are tax deferred. Keeping your retirement savings in a traditional investment account can mean that you must pay taxes on thousands of dollars of interest every year. The 1099s that you receive for your interest have to go on your tax return, and can push you into a higher tax bracket.
With fixed annuities, you don’t pay taxes on the earnings until you make a withdrawal or begin receiving an income from your fixed annuity. This allows you to plan ahead for tax season, and not be surprised when you suddenly owe more than what you had originally planned.
Fixed annuities, according to many, are some of the safest investments around. There are several safeguards in place that work to keep your money safe.
Companies that offer fixed annuities have to keep dollar-to-dollar reserves. This is a state required law, which means that they can only lend out the money you invest with them one time. On the other hand, a traditional bank can lend your money up to 9 times, so there is a greater chance for loss. Because they can only lend it out once, these companies tend to select conservative investments, which keep your money even safer.
Every company that holds fixed annuities must be part of a group of reinsurers. If one company in the group fails, the others have to reinsure them, or guarantee their investments. Most companies holding fixed annuities have between 4 and 14 reinsurers per company.
Note that these regulations only apply to non-fraternal companies. If an annuity is with the Knights of Columbus or a similar fraternal group, it is not regulated by these laws.
Drawbacks to a Fixed Annuity
Some fixed annuities may have an adjustable interest rate. This means that the interest rate is fixed for the first year or so, but can potentially go down thereafter. If you’re looking to invest in a fixed annuity for a particular period of time, ensure the company will pay the same rate of return for all years invested.
Some people want to stick their IRA into a fixed annuity, but that doesn’t usually make sense. Since an IRA already offers tax deferment, that benefit of a fixed annuity won’t help you any. The only reason one may choose to invest their IRA into a fixed annuity vehicle is the rate of return being higher than what you might get in another type of investment.
Should I Buy a Fixed Annuity?
There’s not one type of annuity that is a good choice for every person. Some will prefer an immediate annuity, others a fixed, and even others will need different investments altogether.
Benefits of a Fixed Annuity
Many people like fixed annuities because they are tax deferred. Keeping your retirement savings in a traditional investment account can mean that you must pay taxes on thousands of dollars of interest every year. The 1099s that you receive for your interest have to go on your tax return, and can push you into a higher tax bracket.
With fixed annuities, you don’t pay taxes on the earnings until you make a withdrawal or begin receiving an income from your fixed annuity. This allows you to plan ahead for tax season, and not be surprised when you suddenly owe more than what you had originally planned.
Fixed annuities, according to many, are some of the safest investments around. There are several safeguards in place that work to keep your money safe.
Companies that offer fixed annuities have to keep dollar-to-dollar reserves. This is a state required law, which means that they can only lend out the money you invest with them one time. On the other hand, a traditional bank can lend your money up to 9 times, so there is a greater chance for loss. Because they can only lend it out once, these companies tend to select conservative investments, which keep your money even safer.
Every company that holds fixed annuities must be part of a group of reinsurers. If one company in the group fails, the others have to reinsure them, or guarantee their investments. Most companies holding fixed annuities have between 4 and 14 reinsurers per company.
Note that these regulations only apply to non-fraternal companies. If an annuity is with the Knights of Columbus or a similar fraternal group, it is not regulated by these laws.
Drawbacks to a Fixed Annuity
Some fixed annuities may have an adjustable interest rate. This means that the interest rate is fixed for the first year or so, but can potentially go down thereafter. If you’re looking to invest in a fixed annuity for a particular period of time, ensure the company will pay the same rate of return for all years invested.
Some people want to stick their IRA into a fixed annuity, but that doesn’t usually make sense. Since an IRA already offers tax deferment, that benefit of a fixed annuity won’t help you any. The only reason one may choose to invest their IRA into a fixed annuity vehicle is the rate of return being higher than what you might get in another type of investment.
Should I Buy a Fixed Annuity?
There’s not one type of annuity that is a good choice for every person. Some will prefer an immediate annuity, others a fixed, and even others will need different investments altogether.
Click here for a FREE E-BOOK, "Secrets of a Stree Free Retirement - How to Make Sure You Don't Outlive Your Nestegg!"
To get more information so you can make the best decision for you and your family, call:
Your Wealth Preservation Experts
602-750-3891 or 520-705-4596
