What is an Annuity?:
An annuity is a form of "savings
account" with certain tax advantages offered by insurance
companies.
How is my Money Protected?
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Annuities
are backed by reserves. State law requires life
insurance companies to have reserves equal to 100%
of the amount of money placed in an annuity plus
the accumulated interest. Regular audits of insurance
companies are conducted by the Illinois State Insurance
Department.
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The
State Insurance Department regulates which types
of investments insurance companies make with annuity
money.
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All annuity
funds are insured by the State Guarantee Fund (similar
to the FDIC) |
What is meant by Tax
Deferred Growth? Why is it Important?
The phrase tax deferred means that you do not pay
tax on the interest earned in the annuity until the money
is withdrawn. The growth refers to the extra growth
gained from the continual reinvesting o the tax deferred
money ordinary lost to taxes.
This is important because annuities will accumulate money
faster than CD's and savings accounts. Example:A $10,000
deposit (for an individual in a 28% tax bracket) earning
8.5% interest on both an annuity and a CD will result
in the following-
10 Years:
|
CD
Annuity
|
$18,112
22,609 |
|
20 Years:
|
CD
Annuity
|
$32,805
51,120
|
|
30 Years:
|
CD
Annuity
|
$59,417
115,582
|
Why are Annuities an Excellent
Investment?
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Convenient,
management free investment plans. |
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Accompanied
by a trained insurance/investment professional. |
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Upon death,
annuities are paid probate free to
the beneficiary. |
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Interest
is earned tax free. |
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Annuities
have historically paid higher interest rates than
similar investments. |
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