All of us like to place our investments in places where they are safe and earn good interest. Annuities have tax advantages and higher interest rates than most savings accounts, money market accounts and certificates of deposit.
We offer fixed annuities from several highly rated insurance companies. These annuities can be either a “SPDA” (single premium deferred annuity) or a “FPDA” (flexible premium deferred annuity). All of these have a minimum annual interest that they pay. The interest is not taxed until you make a withdrawal – this is different from other savings plans where the interest is taxed in the year that it is earned.
One of our major annuity programs involves retirees who reach the age of 70½ and must begin taking distributions from their qualified investment plans. Many of these people do not need the money, but they must fulfill their distribution requirements. We help them to take their distribution, pay the required taxes, then put the rest into a FPDA to restart earning tax deferred interest.
Another interesting use of an annuity is to pay long-term care insurance premiums. This is how it works: you open an SPDA with an amount approximately 10 times(*) the annual long-term care insurance premium. You then make this an “immediate” annuity with an annual withdrawal equal to the insurance premium on the date that the premium is due. Given the right annuity “terms and conditions”, the annuity will last nearly anyone’s lifetime, so there would always be enough to pay the premium. (* we will help you calculate the amount needed)
People still in their careers who wish to invest in this type of program can leverage the annuity by placing it into a Roth IRA. However, there are limits to the amount you can contribute to a Roth. So a standalone FPDA works well in combination with a Roth IRA for many individuals in their pre-retirement years.
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