What are Annuities?
Annuities are investments issued by insurance companies that can be used to help build a guaranteed income stream or a retirement nest egg. It’s like being able to create your own pension fund or IRA. Annuities come in many varieties, helping investors reach diverse retirement goals.
Annuities can be held in front of the IRA/401(k) tax wall or behind it. Both would be considered tax-deferred. In front of the tax wall, the money deposited is after-tax money and has no artificial limits placed on it. The annuities behind the tax wall are funded using before-tax money and is limited based on IRS limits.
When it is time to withdraw your money, usually at retirement, 100% of the money held in an IRA or 401(k) account is subject to tax. Whereas with money that is held outside of the IRA/401(k) tax walls, only the gains are subject to tax, not the principal.
If you have money that is in an IRA or a 401(k) or any other tax-sheltered funds, it can be rolled over into a high-yield annuity without penalties or taxes being assessed at the time of the rollover. We, at the Kaye Agency, will help guide you through the process.
What are High-Yield Annuities?
Annuities are generally purchased for the purpose of maximizing your retirement income while protecting your principal. There are many different types of annuities, including fixed, variable and indexed.
Although the Kaye Agency has access to all the varying types of annuities, our focus is on the “High-Yield” Annuities. The Annuity that we recommend is a 10-year hold and has had gains in excess of 30%. You will never lose money no matter how poorly the market performs. Future projections are based on past performance. However, past performance is not a guarantee of future performance. Ask us at The Kaye Agency for more details.
5 Reasons Why Americans Have Invested Over 3 Trillion Dollars Into Annuities
1. Safety – Insurance companies are forced to set aside $1 for every $1 invested in annuities. Banks often fail because they take $1 and make $10 in loans that can, and sometimes do go bad. Annuities don’t do this. A banker I am told, had a huge penny on her desk. She used to tell bank customers that the penny was more than anyone ever lost in an annuity.
2. Guaranteed income for life – Annuities can fill in the gaps when social security, pensions, and other retirement accounts don’t provide enough retirement income. Annuities allow you to take a lump sum today and create a steady stream of income paid monthly, quarterly, or yearly.
3. High-Yield Returns – Traditional fixed annuities provide a safe alternative to bank CDs and savings accounts. Some uncapped index annuities (the ones that the Kaye Agency uses have earned as much as 30% in specific years. You earn a significant portion of the market upside without risking your principal or any of your gains. You will never lose a dime on either your principal or your gains, no matter how bad the market gets. However, if the market rises, your annuity value rises with it.
4. Tax-deferred growth – Annuities offer triple compounding on your interest. Earn interest on your principal, interest on your interest, and interest on the money normally lost to taxes.
5. Leave a Legacy – You can leave a loved one a monthly, quarterly, or annual check. This can be especially beneficial if you think they might not spend it wisely.