Are you sitting down? I hope so. As someone who considers themself an annuity champion, I’m going to be 100% honest with you all. Not everyone should invest in annuities.
For starters, it can cost an arm and a leg if you want to opt-out of the annuity. This is most true in the first few years — especially if you paid a hefty sales commission. If so, you may incur punitive surrender charges.
Additionally, when all expenses and earnings are calculated, annuities may offer lower average returns than mutual funds or CDs. However, if the company you purchased the annuity from goes belly up, you’re out-of-luck. And, annuity contracts can be downright complex and confusing, what with the various payout terms and tax structures.
But, instead of running away from annuities like you would when walking into a cobweb, you should learn all you can about them. When you do, you may realize that annuities aren’t as terrifying as initially thought. And, to get you started, I recommend digesting the following 10 easy-to-understand annuities info.
Why is Due considered the nation’s #1 retirement and annuity plan? For starters, it was designed for the average person. In fact, anyone can sign-up for an account in under 10-minutes. Secondly, Due offers a 3% guaranteed interest rate on your money. No puzzles or games. Only a simple and predictable retirement plan.
But, Due has provides a plethora of information. These resources include the company’s blog, as well as the numerous guides. Each of these can assist anyone in making sense of annuities.
But, if you’re just starting out with annuities, then you have to check out Due’s Ultimate Guide to Annuities. In it, you’ll find the various annuity types, values, and how exactly annuities work. There’s also a glossary of key terms.
In short, whatever information you need to find regarding annuities, you’ll find it here. Best of all? There’s no industry jargon or confusing terminology—just a straightforward and easy-to-understand guide.
FINRA is a government-authorized not-for-profit organization that oversees U.S. broker-dealers. Its main objective is to protect investors and ensure the marketplace’s integrity. With that in mind, it shouldn’t come as a surprise that the organization has put together a practical guide to annuities.
As with Due, this six-part guide is ideal for annuity newbies. In it, you’ll learn the origins of annuities, how much they will cost you, and how each type varies. It also covers the advantages and disadvantages of annuities. And, most importantly, what you should consider before purchasing an annuity.
If a six-part guide seems daunting, just know that you’re not reading all 1,178 pages of Lord of the Rings here. The FINRA staff has kept this guide lean and mean so that it’s easy to digest.
Since annuities are insurance products, it makes sense for an insurance company to provide easy-to-understand annuities information. Case in point, this brief introduction from Nationwide.
While this may not be as thorough as the guides from Due or FINRA, this is perfect if you only need a crash course in annuities. What I’ve found most useful is that handy quick annuity comparison chart when deciding between a fixed, variable, indexed, immediate, or deferred annuity.
If you require further information, Nationwide also has resources like analyzers and annuity calculators. These can be used to ensure that you’re making the right financial decision.
“The insurance companies that create annuities often make them seem like investments,” writes Ron Lieber. “But really, they’re more like insurance.”
That sentence made this New York Times column one of my personal favorites. After all, this is the biggest misconception regarding annuities. They are not annuities. They’re actually insurance products. This really can’t be stressed enough.
The column has does an excellent job in clearly defining immediate annuities, fixed annuities, variable annuities, and index annuities. But, Lieber also doesn’t sugarcoat the fact that annuities are complex. And, he also shares a list of questions that you should always ask the annuity company prior to making such a long-term commitment.
Blueprint Income is a marketplace where you can sign up for either a personal pension or a traditional annuity. As such, they’ve also assembled a basic annuity guide for beginners. In it, you’ll find basic Annuity 101 information. But, you’ll also discover some more pertinent info, such as answering if an annuity is right for you.
As with other guides, you’re not reading a novel here. The information is short, concise, and to the point. However, if you want to further step up your annuity game further, Blueprint Income has additional resources like an Annuity Decision Guide. I’m also a fan of the Tips When Buying a Longevity Annuity piece as well.
When you’re known as the Annuity Expert and have been listed as a top annuity expert you should be listening to; you would hope that you can back this claim up. And, yes. Shawn Plummer does prove that you should hear him out when seeing annuity advice.
In Plummer’s complete guide to annuities, you’ll learn what insurance-based annuities are. For the curious cats out there, these would be a traditional or MYGA, fixed indexed, long-term care, single-premium, deferred, and QLAC. What makes his guide stand out, however, is that he goes over the three parts of an annuity contract and debunks common myths, like there’s no way to withdrawal your money.
Overall, Plummer covers the basics. But, he also goes more in-depth on other annuity topics that most annuity resources don’t go near.
Stan Haithcock, aka Stan The Annuity Man, is another leading authority in the world of annuities. He’s even considered one of the most trusted annuity dealers in the county. So, he’s definitely someone whose expertise you should seek.
If there is one lesson you should take away with Stan, it’s his P.I.L.L. acronym. It stands for;
P = Principal Protection
I = Income for Life
L = Legacy
L = Long Term Care/Confinement Care
Why is this so important? Because you can use the P.I.L.L. acronym to answer the two most important questions when deciding whether or not to purchase an annuity;
What do you want your money to CONTRACTUALLY do?
When do you want those CONTRACTUAL guarantees to start?
“It’s that simple,” says Stan. “From those 2 answers, then the specific annuity type and transfer of risk solution are easy to choose. In combination with the P.I.L.L. acronym, your next step should be to quote all carriers for the best contractual guarantee for your specific situation.”
Written by Bob MacDonald, Founder of LifeUSA, retired Chairman & CEO of Allianz Life of North American, Senior Strategy Consultant to All Things Annuity, this is another easy-to-understand introduction to annuities. As with the other entries, MacDonald does an excellent of providing a simplified definition of annuities.
However, he does explain what you should consider when buying an annuity. Hint, it’s demanding “a clear explanation of the basic value, benefits, fees, and guarantees of the contract.” However, what’s extremely helpful is how he describes the value of annuities in a retirement plan.
“Annuities are intended — and, indeed, structured — to be a rock-solid foundation for your dream retirement plan,” he writes. “Without the solid underpinning of the security, guarantees, and income that an annuity can provide, any retirement plan is susceptible instability.”
As a part of CNN’s ultimate guide to retirement, here you’ll yet again discover annuity basics. Speficifiaslly, the different types of annuities, payout options, the fees associated with annuities. Additionally, the guide discusses the tax benefits of annuities and what happens to your annuity after you die.
Other important questions that you might want to be answered? Should you hold your annuity within your IRA? And, should you exchange your annuity for a new one?
There’s a misconception that your taxes will be lower in retirement. But, as I’m sure you’ve heard before, never assume, as this makes a you-know-what of you and me.
With that in mind, you will have to pay taxes. The good news? You don’t have to worry about this until you begin making withdrawals. But, the way that your annuity is taxed depends if you used qualified or unqualified funds.
Since most of us aren’t tax experts, this will go directly over your head. Thankfully, Daniel Schorn over at Northwestern Mutual untangles this important topic for us in a surprisingly easy-to-understand article. While this won’t make you an expert, it does describe how withdrawing from your annuity will impact your taxes, as well as retirement income.
The post The 10 Most Easy-to-Understand Annuities Info You Can Find appeared first on Due.