Cents and Sensibility
QUESTION: A broker recently tried to sell me an annuity. Can you tell me more about them?
Answers on advantages
ANSWER: An annuity is a contract between you and an insurance company, designed to help increase your retirement income. Annuities can be either fixed or variable and can provide that additional income now or allow your money to grow tax-deferred to provide even more income later.
A unique feature of both fixed and variable annuities is their ability to provide a retirement income payment you can't outlive.
With a fixed annuity, the insurance company guarantees a certain rate of return for a certain length of time, regardless of market conditions.
With a variable annuity, your dollars are placed in a a market-sensitive account where you earn the value of the account, either up or down.
In other words, your account value will fluctuate depending on the performance of the variable annuity account.
You owe no income taxes on the gain in the annuity until you access income.
You decide when to withdraw that income.
However, withdrawals cannot begin until you are age 59 1/2 without incurring a 10 percent government excise penalty.
A unique feature of both fixed and variable annuities is their ability to provide a retirement income payment you can't outlive. The payment can last as long as you live, even past age 100. You can choose a fixed or variable payment.
With a variable payment, your monthly check can fluctuate, which gives you the chance to outpace inflation.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: email@example.com