As I write this the average 1-year certificate of deposit rate is 0.24% and the average 5-year CD rate is 0.78% (New York Times, 6/16/13). And yet there are fixed rate annuities out there that will yield 2% or more each year for the next 5 years! No hype, just a higher yield.
If you could reduce or eliminate owing taxes on your Social Security benefits would you be interested?
When preparing the IRS Form 1040 a portion of a retiree’s Social Security benefits are added on top of the normal taxable income to determine if any Social Security income will be subjected to income taxes. Shifting some assets to deferred annuities may stop this taxation because annuity interest kept inside the annuity is not included in the Social Security Benefit Taxation formula. This can make sense if you are paying this additional tax and you have taxable interest that you are leaving for future use (in other words, you are getting a Form 1099 on accounts where the interest is compounding). Of course, you should consult your own tax advisor for your situation.
If you could possibly earn more interest without subjecting your money to stock market risk of loss would you be interested?
This is the index annuity story. You may earn significantly more interest with an index annuity than you would in the bank. No, you will not earn stock market returns – if you want stock market returns (and risks) buy equities. But you just might earn more interest over time with an index annuity without incurring market risk.
If you had the power to determine when you pay taxes on your interest – you, not the IRS – would you be interested?
Annuities give people tax control because you are not taxed on annuity interest that is not withdrawn. An annuity lets you pay the taxes when you decide to take the interest and not before.
If you could end withdrawal penalties, but still earn competitive interest, would you be interested?
When a certificate of deposit renews a new interest rate is declared and a new penalty period begins. Even if that CD has been rolled over for 30 years there will still be a new “penalty for early withdrawal” in year 31. Fixed annuities also have surrender penalties, but with a few exceptions these penalties end at some point down the road. There comes a time when new annuity rates are declared without penalty.
If you look at fixed annuities you might be interested.
Fixed annuities offer a number of benefits and guarantees. They are not a perfect fit for everyone nor every situation and they have restrictions. When looking at an annuity you should read the materials and disclosures. However, when all is said and done you may find that a fixed annuity is a good place for part of your money, even without the hype.