Are You Satisfied With Your Current Investments?

  • Are you concerned about safety of your funds?
  • Would you like to earn more and pay less in taxes?
  • Would you like to reduce or eliminate taxes on Social Security Income?
  • Would you like to earn a competitive rate of return?
  • Would you like to have access to your money at all times?
  • Are you covered for expenses related to terminal illness or nursing care?
  • Are you concerned about outliving your income?
  • Would you like the funds in your account to bypass probate?

If you answered "yes" to all or most of these questions, you are not alone! These are the concerns of most people and a fixed annuity may be the answer. Let’s examine the benefits of a fixed annuity with STYLE! Safety, Tax Control, Yield, Liquidity, and Estate Planning.

Safety

With their guaranteed return of principal (offered on many fixed annuities) and current rate guarantee, fixed annuities are among the safest investment vehicles in the market place, allowing conservative investors to earn a competitive rate of return without risking their principal.

Tax Control

The following example illustrates the benefit of a tax- deferred annuity vs. a fully taxable CD. The difference is substantial.

 

Assumptions:

  • Initial investment: $50,000
  • A 4% interest rate return on both annuity and CD
  • A 28% individual tax bracket

The Accumulated Value in 30 Years:

  • Annuity: $162,170
  • CD:          $117,192

To compare the results accurately, we must account for the taxes that must be paid on the gain portion of the annuity.

($162,170 - $50,000) X 28% = $31,408

$162,170 - $31,408 = $130,762 net amount to the annuity owner

The Net (after tax) Accumulated Value in 30 Years

Annuity:           $130,762

CD:                  $117,192

Difference:      $  13,570

With an annuity, the owner not only earns interest on the principal, but also interest on interest. Annuities may also help reduce or eliminate taxes on social security income.

Currently, if an individual’s or married couples’ (filing jointly) provisional income exceeds specific thresholds, up to 85% of their social security income may be taxed. See the following chart for details:

  Single Married Filing Jointly
Provisional Income Less than $25,000
Social Security income are not taxed
Less than $32,000
Social Security income are not taxed
Between $25,000 and $34,000
Up to 50% of Social Security income may be taxed
Between $32,000 and $44,000
Up to 50% of Social Security income may be taxed
Greater than $34,000
Up to 85% of Social Security income may be taxed
Greater than $44,000
Up to 85% of Social Security income may be taxed

Therefore, by transferring money from taxable account to a tax-deferred annuity, taxpayers’ provisional income may be reduced, possibly lowering or eliminating taxes on their Social Security Income.

Provisional Income is the sum of a Taxpayer’s:

•    Adjust Gross Income (AGI)
•    Tax-Exempt Interest for the year
•    Half of the Social Security benefits for the year.

Yield

A fixed annuity earns a competitive rate that is tax deferred.  In addition, it offers a minimum guaranteed rate of return providing an added layer of protection and peace of mind.

So what rates do annuity owners really earn?

Tax Equivalent Yield = Tax Deferred Yield divided by (1-annuity owner’s tax bracket)

Example: A 3% annuity rate for an annuity owner with tax bracket of 28% yields 4.17%

Tax Equivalent Yield = 3% divided by (1-28%) = .03/.72 = .0417 or 4.17%

Liquidity

Fixed annuities are very liquid.  Some offer the principal guarantee or return of premiums, allowing owners to recover their principal at any time.  In addition the free withdrawal feature allows contract holders to receive up to 10% of their funds each year without a surrender charge.  Nursing home and terminal illness riders may also be available in some annuities, allowing owners to receive some or all of their funds for nursing home stay or other purposes.  Owners could also start their income phase and begin receiving income for a specified period of time or for as long as they live.

 

Estate Planning

One of the benefits of an annuity is that at owner’s death, funds would not have to go through probate and are paid directly to named beneficiaries.  This may result in substantial savings to the owner’s estate since all costs associated with the probate (i.e. court costs, attorney and appraisal fees) are avoided.  Furthermore, it saves time and the information that normally would become public, as a result of probate, remains private.

 

If you:
•    Are at least 50 years of age
•    Do not need your money for 5 years or longer
•    Are in a 25% or greater tax bracket
•    Need to diversify your portfolio
•    Need to preserve your assets – have a long term accumulation goal
•    Need to create a guaranteed income in retirement

You should consider a fixed annuity!