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Annuity – Issues with Immediate Annuities
The value of a good investment is immeasurable, whereas a bad investment can be life altering. Consumers face this assessment in their decision whether to purchase an immediate annuity.
An immediate annuity permits you to handover a lump sum of cash into a series of scheduled monthly payments. The buyer can design the payments for a set period of time or over a lifetime. A lifetime income is definitely alluring; however, consumers have voiced several complaints regarding these unique investment vehicles.
One complaint is that there are inflation risks with immediate annuities. The monthly payment for these investments remains fixed throughout a person’s lifetime, while the purchasing ability of that monthly check drops with inflation.
Annuity buyers can protect themselves with immediate annuities that are indexed to inflation. By doing this, their purchasing power is protected. However, they will receive a lower monthly check.
Another complaint with immediate annuities is that there is no access to the money. Once consumers purchase the annuity from the insurance company, they no longer have access to these funds. For this reason, it is advised consumers put only part of their funds into an immediate annuity and the rest in more liquid resources.
The other issue with the immediate annuity is that they cannot be passed down to heirs. When a consumer purchased an immediate annuity, their money is no longer part of their worth and can no longer be passed on to their beneficiaries. There are some immediate annuities when upon the death of the annuity holder will pass to the spouse, but few are constructed to pass down to children or grandchildren.
With the hope of making a good investment instead of a bad one, consumers face the choice whether an immediate annuity is right for them. Complaints by previous consumers should be acknowledged in deciding if immediate annuities are the best investment for them. Sometimes your best investments are the ones you don’t make.
Annuity – Annuities during Christmas Season
There are two basic questions that should be on people’s mind these days. What is on your Christmas list this holiday season? And, are you shopping around for an annuity?
According to past research done by international savings, investments, and insurance group, Aviva, on the average people spend just 7 days in total shopping for the right annuity or pension plan. Also, 55% of adults surveyed said they would spend a week researching and consulting at least 4 or 5 sources of data before booking.
Research has shown that over a lifetime, the average time spent at purchasing Christmas presents is 190 days. It is alarming to imagine that people spend more time choosing a Christmas present for Aunt Louise, who they probably haven’t seen since last Christmas, than they would in finding the best product to see them through their retirement.
In my opinion, planning for your retirement should be considered more reasonable. Unless Aunt Louise is an heiress who is preparing to leave you her fortune, I would at least start thinking more seriously about purchasing an annuity.
By researching and shopping around for an annuity, people could increase their retirement income by at least 10% or more. And by getting reliable financial advice, they could be planning for the retirement life they earned. Shopping for an annuity that is suitable for a person’s needs in their retirement is a lifetime gift.
It is essential that annuity buyers get the best advice and find the best results to assist them in increasing their income in retirement. People should take the time and think competitive while speaking to a professional financial adviser. It could be the best gift you ever give to yourself. After all, you won’t probably see Aunt Louise till next Christmas.
Annuity – Annuity Ownership of the Contract
An individual increasingly comes to know who he is through the stand he takes when he takes ownership of something. This statement holds true for any owner of a contract.
You are considered an owner of a contract if you have the right to name the beneficiary or the right to cash in a policy or to borrow against the cash value of the policy. But did you know that unless that value is protected by state law, you could be lawfully forced to liquidate the contract and make the proceeds available to your creditors.
For this reason, the most effective way to protect money in a life insurance or annuity contract is to make someone else the owner of the contract. You are actually making it a gift by making your spouse, children, or others the owner of your existing contract. The value of the gift is based on the cash surrender value of the contract.
Keep in mind that if the gift is to anyone other than a spouse you may have to file a gift tax return. Your lifetime estate and gift tax exception could possibly be used partly up if the gift is more than $10000 per year to any benefactor. You should make the gift at any time you are not subject to the claims of any creditors or potential noted creditors and when you are still in credit.
If an annuity or insurance contract is not owned by you, then it usually cannot be taken by your creditors. But as an example, if your spouse is the beneficiary and the owner of a said policy, the policy cash values are not lost if you get sued and lose.
A common practice, preferred by most advisers, for the management of policies payable to children is to have the contracts owned by an irrevocable life insurance trust. They too would be very difficult for a creditor to get to the cash values of the policy.
As with any contract, changes in various state and federal laws can affect your asset protection devices. You should contact professionals and legal experts about further details about protecting your assets from future lawsuits. You should consider all details, however, in who you should have as ownership on your contract.
