Annuities Have S.T.Y.L.E.Mnemonic devices are used everday, to remember the names of the presidents, the date of some important historical event, and, now, we can also use them to remind us of the the advantages annuities have to offer.
Annuities have S.T.Y.L.E.
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S is for Safety
... which annuities offer in spades. All fixed annuities have guaranteed rates, making sure that no matter what happens in the market, your money is safe. If participating in the gains of the stock market is attractive to you, however, equity-indexed annuities offer the potential to participate in the gains, yet still be protected against the losses of the stock market - your premium stays safe, you continue to earn a minimum guaranteed rate, but market performance guides your potential gains. Because life insurance companies offer annuities, state law and the financial strength of the insurance industry protect your money. The insurance companies that issue them are legal reserve companies, and as such are required by law to maintain substantial reserve funds to meet all their contractual obligations. These companies are also continually scrutinized by third-party companies and rated for safety by trusted names like Standard & Poor's, Moody's, and the industry's leading rating service, A.M. Best, so you can quickly assay the historical stability of a particular company to enhance your peace-of-mind. In many states, annuities often enjoy enhanced protection from creditors, as well.
T is for Tax Deferral
... which goes hand in hand with compound interest. With tax deferral, you don't pay taxes on your earned interest until you use the money. This lets your savings grow in three ways: the interest you earn on your premium, the interest you earn on your accumulated interest, and the interest you earn on the money you didn't lose to taxes. You may pay taxes on your earned interest eventually, but you'll have built up a substantially larger nest egg in the meantime. Tax deferral puts you in control, letting you choose when to pay those taxes, which is important because it's not just what you earn, it's what you keep that counts!
Y is for Yield
... an arena where annuities consistently outperform CDs and many other taxable savings plans. Annuities are offered at competitive, market-based interest rates, and historically, have offered a 1-2% advantage over CD rates. Demonstrably higher yields combined with the benefits of tax deferral make annuities a best bet for maximizing your accumulation of retirement savings.
L is for Liquidity
... another area where annuities shine because annuities give you access to your money in ways other savings plans don't. Most annuities have withdrawal provisions that provide you with penalty-free access to some of the value in your savings. Most annuities can also be annuitized penalty-free at any time (in other words, converted into a series of payments). Most annuities also offer living benefits which can give you access to all or part of your money should you become confined to a nursing home, diagnosed with a terminal illness, or unemployed.
E is for Estate Planning Advantages
We wanted to establish a bit of extra income. There was a good recommendation about ImmediateAnnuities.com on CNN. We also liked that we could see excellent reviews about them on Google. They were very thorough from our first inquiry to when we decided to buy our annuity from Mass Mutual. They always answered our questions promptly and followed up with the insurance company, too. We have been receiving our monthly payments since last November and couldn’t be happier. What more can we say?
... where annuities allow for immediate transfer of benefits to your designated beneficiaries. Annuities aren't subject to the cost, hassle, delay, and lack of privacy of the probate process. Also, income taxes on the gains in your annuity are paid by your beneficiary, not by your estate (unless you have no designated beneficiary, in which case your estate is the beneficiary). Annuities also, if set up properly, allow you a great deal of flexibility in the naming of beneficiaries. You can name your spouse, your children, a trust, or a charity as your beneficiary (and these are just example; the list of possible beneficiaries is longer), and any benefit is then taxed according to the tax rate of the beneficiary. Your beneficiaries get their money immediately, and without legal fees or public scrutiny. What's more, you can name primary and secondary beneficiaries, so if for any reason your beneficiary is no longer in a position to receive funds, the benefits can be immediately transferred to a second named beneficiary, and you can change your designated beneficiary at any time.
No other savings plan offers all these advantages, and we've only just scratched the surface of these topics here. Just keep in mind that annuities have S.T.Y.L.E.