Fixed Annuity Rates And Annuities Explained
Retirement money in IRAs, 401Ks and other pension plans are wonderful options but they offer a few drawbacks. Some people want to put away more funds for retirement and enjoy the tax deferred growth while they have a high income. Even in retirement, people look to tax saving ideas and ways to prevent the taxation of their entire Social Security check. To make tax matters worse, the government requires that everyone draw money out of their traditional IRA, pension or 401K when they reach 70 ½.
One method growing in popularity that solves both dilemmas is to use a variable annuity and take advantage of it's tax sheltered growth. Best of all, if you never want to use any of the money, you don't have to withdraw it.
The growth of the variable annuity depends on how you invest your money. Inside each annuity are mutual funds and investment choices. You don't have to be a financial genius to use this product since most annuities offer a group of preselected funds balanced appropriately for your age and risk tolerance. There are also options that automatically rebalance your funds so you maximize your returns and maintain your investment safety. These annuity options are excellent tools for the investing novice or more seasoned investor that wants a less time consuming investment.
Other annuity options on most variable annuities include death benefits guarantees. If you invest when the market is high and happen to pass when your funds dropped below the original investment, your heirs receive the full amount you invested. Other options offer a guaranteed return on you money for the heirs.
The annuity doesn't just have death benefit options for your heirs. It also has living benefit options for you. The guaranteed minimum income benefit gives you the option of taking a lifetime income based on the highest anniversary value. You can't use this lifetime income option until you've had the contract for a specified period, which varies from company to company. Each contract varies.
Another living benefit is the guaranteed minimum withdrawal benefit. With this living benefit annuity option, you have a guarantee that you'll always receive all your principal back as long as you take in withdrawal of five to seven percent a year. You can start this option immediately. Each company offers a little different twist to this rider.
The final living benefit you can add to your variable annuity is the guaranteed minimum accumulation benefit. The GMAB, guaranteed minimum accumulation benefit, varies from company to company. Some companies guarantee a simple return of premium while others guarantee a return between five and seven percent. Another variation to this option is how the companies set their baseline. Some companies use the initial investment and others reset the base using a set period so you lock in gains.
There are many different forms of these annuity options that it pays to seek the advice of someone that understands the product. You need to compare variable annuities before you buy. Not only are the options each slightly different, but their costs also vary.
