Should You Buy Annuity?

Annuities are complex investment of insurance products. They often pay high commissions to the people who sell these products gives them a strong incentive to convince you that the annuity is a good investment.

Before buying an annuity you need to know why you bought it and what you expect. Answer the question below, and then take the time to learn and ask all the relevant questions about annuities.

1. What kind of annuity you buy?
Immediate or deferred
Immediate: immediate annuity pays periodic income of the period after the annuity is purchased. That period depending on how often the income is paid. For example, if the income is monthly, the first payment is made one month after the immediate annuity is purchased.

The Purpose Of An Immediate Annuity: People who buy annuities are urgently looking for revenue assurance and revenue assurance want to know will last throughout their lives. They understand that the future no longer have access to their main income.

Suspended: have a period in which premiums and investment returns are accumulated prior to the periodic payments. Accumulation period can be very long, such as deferred annuities for retirement that lasted for decades until the employee reaches retirement age. A deferred fixed annuity provides a guaranteed fixed rate of return by the insurance company. Unlike fixed annuities, variable annuities allow you to invest in a portfolio of stock and bond accounts.

The purpose of the fixed annuity: People who buy annuities still looking for a safe investment that allows them to defer income tax on the interest they earn.

Purpose Of A Variable Annuity: Your money can be invested in investment instruments terraced with no fixed return, especially in mutual funds. Value for your money in a variable annuity and the amount of money that will be paid to you depends on the investment performance net of management fees that fund. To provide certainty, the insurance company can give you the assurance that your annuity fund will never fall below a certain value.
Before buying an annuity, ask yourself, "Why did I buy this?" Is it because it is the only solution that someone suggest to you? If so, step back and do some additional research first.

If you buy an annuity because you have seen a lot of investment options and choose an annuity as part of an overall investment plan to complement the other investments you make, then you are on the right track.

2. Making An Investment Plan Before You Buy Annuity
Unfortunately, many people make an investment like an annuity purchase without first taking the time to make long-term investment plans.

3. What Type of Cost Annuity?
Each type of annuity has a different way of charge, with a variable annuity, all fees are disclosed in the prospectus. With fixed and immediate annuities, the insurance company offers a net of all fees.

Learn more about each type of annuity and how each type of annuity charge to you.

4. How To Tax Annuity Work?
When you buy a deferred annuity either fixed or variable, the amount you invest is the concept of the costs to be borne. From that point on any investment gains (or losses) deferred tax is calculated. That means you will not receive interest or dividends on investment gains each year so they do not need to be reported on your tax return. Deferred income tax, however, is not the same as tax-free. At the time of withdrawal deferred annuity, withdrawal benefits first and all subsequent withdrawals subject to income tax.
Tax and Immediate Annuities

With immediate annuity, a portion of each payment considered a return of principal received (return of your own money) and some of the flower. You'll pay taxes for its flowers but not the part that is considered a return of principal. The insurance company will provide a tax statement pointed to the taxable funds.

Before you buy an annuity, the insurance company will also be able to tell you the exception ratio. Exclusion ratio is the amount of the monthly payments are not taxable.

If you change your deferred annuity into immediate annuity, annuity tax will serve as immediate annuities with a portion of each payment is considered a return of principal and partially as interest.

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