Sunday July 22, 2012
Wow! Imagine for a moment if you could deduct massive amounts of money each year for your retirement instead of just the measly 401k amounts. Imagine if you could put back your hard earned money before taxes to the tune of $250,000 per year or more or even $450,000! You could literally create your entire retirement income in just a few years versus thirty years in the 401k only plan.
What was thought impossible is now possible! The plan is called the 412(e)(3) defined benefit plan. If you have a high amount of discretionary funds that would be available for your retirement planning then consider this plan very seriously.
It creates a guaranteed income stream that is inheritable in full to your spouse or family. You won't have to worry about market volatility or how much money you lost today. You will not have to worry about your income generating assets; guaranteed annuities and life insurance are used to fund the plan.
Then when you pass away, a massive life insurance policy pays out. If you already have a life insurance policy, you might be able to cancel it as well because of the coverage build into the plan. You can also keep your current retirement plan going and retire even faster. Sound good so far?
If you want to learn more then be sure to read the new article - 412(e)(3) The Best Of Both Worlds- Annuities and Defined Benefits
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Friday July 20, 2012
Your first annuity purchase is oftentimes confusing and worrisome for investors. Annuities are long term investments and unless you are a natural long term planner you might be a little nervous tying your money up for 10 years or more. If you are investing for the right reasons it should not be a problem but your nervousness is understandable.
Investing in long term investments requires a bit of different thinking that when you were putting monthly amounts back into your 401k or other retirement accounts. It is more like buying a house than mutual fund, stock, or bond. There is more paperwork and it is a more permanent investment. Some solace should come from that knowledge. You will no longer have to make investment decisions on the money you are considering putting into the annuity.
Now consider that you are likely going to add the guaranteed income benefit rider to your annuity as well. Not only will you not have to make decisions on the annuity but you will also, as long as you follow the rules, never have to worry about where your income is going to come from again.
But what if you want to move your money? Unfortunately, annuities have high surrender charges and moving your money will be difficult without incurring high fees and penalties. One option is to move the free withdrawal amount each year, usually 10%. During this time you could use your other investments for income. Or maybe just using the entire free withdrawal amount would be just a good while using your other investments a little less.
Are you still nervous about your first annuity purchase? Read - Your First Annuity
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Friday July 20, 2012
Should annuities be in IRAs? Isn't that double tax deferral and unnecessary fees? It used to be! But that was back when the only real benefit of an annuity was tax deferral and of course some estate benefits.
Now, there are many more benefits to annuities. Consider the riders as proof. And, double taxation is not actually possible and, of course free, if it were.
The income benefit rider is a guaranteed income rider that literally guarantees your income for life no matter how the market performs. Up, down, flat, it makes no difference in your income payments. And if you are worried about losing access to your principal, it offers full principal access.
The stepped up death benefit rider is an increasing balance benefit payable on death. It moves more income to your heirs for them to be able to pay estate taxes. It works a little like a life insurance policy and is in fact the main substitute available for life insurance if a person cannot qualify for a regular life policy.
The long term care benefit rider pays a certain dollar amount for nursing or at home health care expenses. Long term care expenses are the single largest killer of retirement plans and the worst of financial risks to try to self insure.
Do annuities belong in IRAs? Yes! To learn more about why read - One Great Reason To Use An Annuity In Your IRA
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Thursday July 19, 2012
Bonus annuities and recovering fees is a complicated question. The short answer is maybe. The long answer includes many variables.
In theory, a bonus is a replacement if the annuity bonus is more than the cost to sell other investments and move the money into the annuity. The annuity is not specifically designed to recover lost money because of selling investment for transfers. It is hair splitting on words but stick with me for a minute. I believe it is important to be specific.
The bonus pays a bonus for money invested even if there were no surrender charges or fees incurred with the money being invested. That being the case, the annuity must be examined without regard to the fact that the extra money could be making up for fees incurred. Why? An insurance company will not give you money for free.
How is the bonus helping the insurance company and how are they recouping the bonus money deposited into your account? Believe it, they are recouping their money. How?
Mainly it is through higher fees in the form or higher internal fees or lower caps and interest rates. Comparatively, a bonus annuity and a non-bonus annuity basically perform the same over long time periods. The longer the time period the more equal they are. The bonus annuity has its sweet spot though which is evident in the proposals you can get from your insurance agent. Just ask them to run 10 and 15 year proposals for the bonus annuity and the non-bonus annuity. Make certain they are based on the same interest rate.
To learn more about bonus annuities and recovering surrender charges read - Do Bonus Annuities Make Up For Surrender Charge Transfer Fees?
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