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annuities

Annuity in an IRA? Maybe, now

Forever and a day, the rule of thumb has been that you should not use IRA funds to purchase an annuity – primarily because traditional annuities had the primary feature of tax deferral. Since an IRA is already tax-deferred, it’s duplication of effort plus a not insignificant additional cost to include an annuity in an IRA.  This hasn’t stopped enthusiastic sales approaches by annuity companies – plus new features may make it a more realistic approach. Changes in the annuity landscape have made some inroads against this rule of thumb – including guaranteed living benefit riders, death benefits, and other options.  Recently the IRS made a change to its rules regarding IRAs and annuities that will likely make the use of annuities even more popular in IRAs: The use of the lesser of 25% or $125,000 of the IRA balance (also applies to 401(k) and other qualified retirement plans) for […]

The Designation Everybody Should Be Aware Of

At some point in your life you have probably started a new job, applied for life insurance, started an IRA or retirement account, or opened a bank account. You may remember when filling out the paperwork that the form asked for a beneficiary – both primary and contingent. This is simply telling the account’s custodian to whom you want your account to go to should you pass away. Your primary beneficiary is the first (hence the name primary) that receives account balance or death benefit. The contingent is who receives the account balance in the event your primary beneficiary predeceases you. When choosing beneficiaries you had the choice of allocating a certain percentage to the primary and some to the contingent if needed. You may have even had two or more primary beneficiaries that you allocated a certain percent of your account to totaling 100% Then you may have forgotten […]

Types of Annuities

  Last week I explained a bit about annuities and am following up this week on the different types of annuities and way to contribute. When a person is contributing to an annuity they are building or increasing the number of accumulation units they buy. As the money in the account builds so does the number of accumulation units. During the payout phase the accumulation units convert into annuity units. The number of annuity units remains the same for the remainder of the annuitant’s lifetime. When it comes to annuities there are a few different kinds that are available. Potential buyers can choose from variable annuities and fixed annuities. Variable annuities allow the policy holder to contribute premiums and then have those premiums allocated to different sub-accounts that invest in various stock and bond mutual funds. The value of the annuity goes up and down with the general fluctuations of […]

The Other Life Insurance – Annuities

The last few weeks I have been writing about the more conventional form of life insurance that most people are familiar with when I say ‘life insurance’ – which is protection against a premature death. The other life insurance is that which protects your from living too long – and that insurance is the annuity. Over the years annuities have gotten a bad rap – and rightfully so. Like life insurance, annuities are generally sold to the public via a sales force of licensed agents. In most cases, they are not the right vehicle for the individual (I know I am setting the blog up to receive the thunderous rebuttals) but there may be cases where an annuity makes sense.  The other reason annuities get a bad rap is because of the pure insurance (longevity) feature that they provide – especially pure life annuities. A pure life annuity is simply […]

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