Part 3 – Annuities: Beyond The Basics

To decide whether an annuity is appropriate for your client or not takes a little bit of analyzing. If your client is younger than 59 1/2 you need to be sure you will not need to use these funds prior to this age. The IRS imposes a 10% penalty on funds that come out of annuities prior to age 59 1/2. Surrender charges are another aspect of the annuity your client needs to consider. Be sure that the annuity you are considering has surrender charges that are comfortable for their situation. Do you know what type of an annuity you are considering? Be sure that it fits your clients’ investment temperament.

When considering an annuity, you need to do your homework and be sure that the product is suitable for your client. These are a few of the nuances you need to be aware of. Remember, it is their money. Take your time and make sure your client understands where it is going to be invested.

This is a popular method of investing when you are utilizing investment returns that are based on market performance. Here is how it works. You decide how much you are comfortable investing on a periodic basis, and then you set up your Flexible Premium Deferred Annuity to have the same amount of money invested at the same time every month. For example: If you are comfortable with $250 / month, you would set up your annuity so that $250 would be deposited every month on the same day.

Because most of us have a hard time predicting the future, this is the best way to take advantage of the up and down cycles of the markets. There will be times when you are buying on the high side of the market and there will be times when you are buying on the down side of the market.

There are many advantages to owning tax-deferred annuities. One of the benefits is how the funds are handled at death. In the event of your death the proceeds of your annuity are paid directly to your named beneficiary. This keeps these funds out of the probate process. As a result your beneficiary will receive the funds rather quickly. This will allow them to have funds available to help pay for any final expenses they may incur as a result of your death.