Equity Indexed Annuities
The process for investing in equity indexed annuities is fairly straightforward and with the proper preparation there is a possibility for investors to earn a significant amount of money. In order for the process to be as successful as possible, a person should be familiar with the various terms and meanings involved. For example, an annuity is usually a specified amount of money set aside by an investor for a specified amount of time. Investors who have a working knowledge of the system often prove to be more successful than those who do not care to take the time required to make smart, well thought through decisions, "And he hath filled him with the spirit of God, in wisdom, in understanding, and in knowledge, and in all manner of workmanship" (Exodus 35:31).
Depending upon the needs of the owner of the amount invested, a portion of the interest gained can be withdrawn if the need for funding were to arise. A small fee is usually associated with a withdrawal. An owner can decide on a payment schedule of choice for equity indexed annuities, and can even choose to take the entire amount out at once. However, there are stipulations surrounding a complete withdrawal, for example, those who choose to take out the entirety can run into problems if a contract has been violated. According to insurance companies that vary from state to state, most regard EIAs as fixed. This means that at no time is an owner able to own any additional investments within the annuity such as a stock, mutual fund, or bond. An EIA is not meant to fluctuate and instead intended to be as stable as possible. Equity indexed annuities are a form of annuity that are associated with a particular stock and have the ability to earn interest. An indexed annuity differs from one that is fixed in that a greater return is usually gained. Before the decision is made to invest in such methods, people should make point to find out as much as possible about the process of investing in order to safeguard from problems resulting from careless mistakes.
There are differences between equity indexed annuities and more common processes, such as a fixed annuity. For example, investors who desire a safe and secure means of investing can choose to go with an EIA in order to gain an added level of security during an unstable time. Instead of the possibility of losing interest or value, the interest either increases or at the very least stays the same and the amount remains unchanged. The market can prove to be unpredictable at times, and those who choose to invest in safer, less volatile means that instead of taking a big hit during any time in which the market does poorly, simply no interest is gained, however no losses are sustained.
Those who are interested in investing in any form would be wise to conduct sufficient research before on deciding how much to invest and what or where to place money. The Internet can prove to be an excellent source of information for those who are interested in equity indexed annuities as there are many different web pages that are run by financial institutions and experts to be found. Most have been established for the express purpose of assisting those in need and are run by a professional who are familiar with the ins and outs of the investing world. People who are new to the process would be wise to seek the assistance from those who are knowledgeable in the field in order to ensure against the loss of money or assets that can result from poor choices. Many financial institutions also have websites where those in need can gain helpful information and get a free quote on how much the process would cost to begin immediately.
Several advantages can be gained by those who choose to invest in equity indexed annuities, mainly those who are looking towards retirement. The process for investing is an ideal one as a continued specified amount is paid on whatever schedule best fits the needs of the customer. This means that a person who desires to retire could do just that as long as there is enough from the regular payments on which to live off of comfortably. An important fact to remember for those who are looking towards retirement is that the amount of regular scheduled funds might be limited. Different insurance companies allow for different amounts to be paid, however, occasionally there is a limit to how much can actually be granted. In fact, one of the main disadvantages to equity indexed annuities is the fact that insurance companies can even limit the amount of interest earned over a period of time. Limitations can be enacted in a number of ways such as placing a cap on the amount of growth, setting a specified allowable percentage for growth, or by even by setting specified margins.
The market can be unpredictable and many investors take a risk when investing large sums of money in an unstable environment. People who are familiar with the process and those who are starting out can benefit from the advantages and relative safety that the stability of equity indexed annuities can bring. Those who are looking towards retirement should consider the process as the plans can provide for sufficient funds. In a world where uncertainties loom, the ability to be assured of protection against losses in investments can prove to be priceless.
Best Annuity RatesUnderstanding what the best annuity rates are begins with an exploration with what is, exactly, an annuity. An annuity is usually associated with a retirement plan, and is a product sold by life insurance companies to provide monthly income for a certain amount of time or in perpetuity, which is a term meaning no formal end. Many banks also offer the plans, usually sold by someone at the bank who has a license to sell life insurance. "Watch ye therefore, and always pray, that ye may be counted worthy to escape all these things that shall come to pass, and to stand before the Son of man." Luke 21:36) There are some important questions to ask, however, before looking to see what the immediate annuity rates are, and if they are acceptable for your situation.
The first thing to understand about this option is that someone is going to make a commission on the agreement. It is sold as a life insurance product, but instead of being given a lump sum at the death of the insured, the plan begins paying monthly or yearly to the insured either immediately at the time of the sale or at a future date. In many ways, the life insurance company, when it comes this plan, is putting the insured's money in the bank and letting it grow interest just as a savings account might do. This would be called a fixed annuity, which means your money will make a promised rate of return for the life of the policy. In this case, the buyer would be purchasing a fixed rate plan, and would be subject to the current and immediate annuity rates of return. On the other hand, if the buyer of the policy is not concerned about the fluctuation of the stock market, the owner may purchase what is called a variable plan and depending on the performance of money market funds attached to the policy, may actually offer the best plan rates available.
There are some advantages to buying this kind of policy, and may fit some individual's need for future or immediate financial security. First, the buyer can receive tax deferment on the money paid into the plan. That means not paying taxes until the policy begins paying out, and if the payout begins at a time the owner has turned sixty-five, a lower tax bracket may come into play. The buyer of such a policy can also receive lifetime payments if the option is to annuitize. In addition, a life insurance policy is usually included as part of the policy program. Plus, if the buyer decides in a fixed plan, the owner can count on a fixed rate of return for a lifetime.
Let's take the case of Mr. Bobblehead, who is a fifty eight year old man with only ninety thousand dollars in a 401 K plan. The man has a term life insurance policy that will expire on his sixty sixth birthday. The man's wife is ten years younger and can work until she reaches sixty seven. Mr. Bobblehead has been concerned about his life insurance running out and not being able to leave his children much of an inheritance. The man has started a small business that he may be able to take into his seventies. If so, buying a variable policy now might not provide him the best annuity rates, because of the state of the economy. On the other hand, getting the best annuity rates means perhaps he will buy a fixed rate policy, settle for the immediate annuity rates available and allow it to accrue interest.
That plan, plus including a life insurance policy with the plan may be exactly what Mr. Bobblehead needs. With the man's age, buying a life insurance policy up front as part of an annuity program just might answer most of his concerns. But there are other things that Mr. B ought to consider before making a final decision. First and foremost, in many ways this type of policy is much like a CD purchased at a bank. The fixed rate annuity will make about the same amount of interest as the bank offers its customers. The representative of the bank or the life insurance company Mr. B buys the policy from will make a nice commission. That is money that he could have put into a CD.
But the fact that the policy carries with it a life insurance policy was the deciding factor. Mr. B wisely shopped around for several weeks and decided on an east coast life insurance company that had been in business for over one hundred years. The man had read in several different journals that this policy could disappear if the life insurance company ever went belly up. Mrs. B was thrilled to know that if her husband died unexpectedly, she would continue receiving monthly checks until she too passed away. The couple promised one another that in twelve years, when the first policy check arrived, they would take the money and go that famous northwest coffee place at the mall. After all, by that time a cup of coffee there might cost five hundred dollars!
If this type of policy annuity is right for a person's situation, then that individual must decide on the immediate annuity rates, which would imply a fixed policy, or the best annuity rates, which would probably mean a variable plan. And like everything else based on the stock market, what is smoldering today may be ablaze in six months. It is kind of bizarre to listen to the claims of financial companies and life insurance companies on television ads. The basic idea they convey is, "trust us for your rock solid future." This writer has news for the reader: a rock solid future is not found in an annuity or a large investment portfolio, but in the Architect of the Universe!