What is an annuity and how does it work?
Basically, an annuity is a contract between an individual or organization where a series of installments are paid, either one-time, monthly, quarterly or annually to an insurance company, which will pay an income from that money, so, at a certain age, you can withdraw money and receive payments while you live, as opposed to a life policy where the beneficiary receives a check for the amount after death. Within annuities there are two phases; accumulation phase and annualization phase. Accumulation is the period in which a contribution is made to the insurance company, either monthly, quarterly, semi-annually, annually, and uniquely (a single contribution or payment).
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During this time, based on the type of product chosen, interest is honored or credited to that amount, which generates growth within the accumulated value. Then in the annuitization phase, which usually occurs at retirement, you start receiving a scheduled payment for the rest of your life. It is one of the tools that are used for the retirement supplement.
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AuthorizedRepresentatives provides consults for Immediate, Fixed and Deferred annuities. Under these branches, we have different products to always accommodate what you need.
Immediate annuity
One of the main fears we face today is outliving our income. People are living longer than ever, and we all hope we're lucky enough to be a part of that trend. But the following thought always haunts us: "Today I can have an income; and tomorrow? Will my income last as long as me?
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With an immediate annuity, you can turn a lump sum into a continuous stream of guaranteed annuity payments, providing guaranteed income for as long as you need it.
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Since it is your money, you can direct the payments to a certain need. How to fund long-term care coverage or a family member's special education needs, as well as direct annuity payments toward insurance premiums to ensure valuable coverage is available when needed. You can even use annuity payments to make a donation to the charity or organization of your choice.
Indexed fixed annuity
A indexed fixed annuity is a long-term retirement product that ensures principal protection, offers tax-deferred increases in assets, and a reliable stream of income. Within this annuity, you have the flexibility to make additional premium payments if you wish. Throughout the term of the contract, the indexed fixed annuity can earn additional interest credits based on the growth of the utilized principal ratio over a one-year period. This type of annuity is not invested directly in the stock market, which eliminates the risk of direct stock investments. A fixed annuity cannot lose money due to index volatility and the interest credited will never be less than zero
Deferred annuity
As retirement approaches, you move from building assets to planning how to turn those assets into an income stream that will last as long as you live. It can be difficult and frustrating to figure out how to find the income to fund a new chapter in life. As retirement goals, the paycheck disappears and you are responsible for creating a cash flow that lasts as long as you and your spouse need it. need. A deferred annuity provides you with tax-deferred growth for a period of time until the owner decides to take a withdrawal or an income stream from the annuity. A guaranteed interest rate is applied, which it can be fixed, or fixed for one year at a time regardless of market risks. ​​
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Taxation of taxes on annuity benefits
Annuity benefit payments are a combination of principal and interest. They are taxed in a manner consistent with other types of income: the portion of the benefit payments that represent a return of principal or capital (the contributions made by the annuity annuitant) are not taxable. The portion that represents the accrued interest is taxable. The result, over the benefit payment period, is a tax-free return of the annuitant's investment and taxation of the balance.
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In the case of deferred annuities, they accumulate interest earnings on a tax-deferred basis. While the annuity is not taxed during the accumulation phase, it is taxed when the contract begins to pay its benefits. To discourage the use of deferred annuities as short-term investments, the Internal Revenue Code imposes a penalty (as well as taxes) on early withdrawals (and loans) of annuities. Partial withdrawals are treated first as income gains (and are thus taxable as ordinary income); Only after all profits have been taxed are withdrawals considered a return of principal.
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**Authorized Representatives is only dedicated to providing a consult in order to show our clients what options they can count on, based on the client's budget and personal situation. We will never take or tell the client what product they need. It is a complete and personal decision of the client after receiving the consult and evaluation. We are not financial analysts. Always consult your accountant if you have any questions related to your financial statement.**
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