Annuities Secure Retirement Seminars About Nickson Secure Retirement Contact Us Annuities of Washington Home
More About Annuities

Annuities are becoming more and more popular among seniors, and for good reason. However, there are some basic facts to know about them and some common misunderstandings.

Annuities are not right for everyone but are a real blessing for many seniors. Insurance companies offer annuities.

A general definition is “a contract between a life insurance company and an investor, which provides savings for retirement while enjoying the benefits of tax-deferred growth.”

Like any financial instrument, there are several terms and types. To keep this relatively easy to understand, let’s start with three basic types of annuities:

Nickson Secure Retirement

We provide a trustworthy assessment based on your needs. We never bill you and no one has ever lost a dollar.

1) The variable annuity – Once popular during the booming 90’s and even sold by investment brokerage houses, variable annuities can increase in value, but they can also go down in value. In addition, there can be taxes and fees. We don’t offer variable annuities because everything we offer is guaranteed. If you know someone who had a bad experience with an annuity, it probably was from a variable annuity.

2) The immediate annuity – Here the company controls your lump sum under a contract and they agree to pay you a monthly amount for the rest of your life or for a “period certain” like 5 or 10 years. Some offer a combination of the two. These immediate annuities offer you a lifetime income with a guarantee of cash flow to at least your heirs if you live less than the “period certain.” A common comparison to an immediate annuity is Social Security or a pension plan in that they provide monthly income throughout your lifetime. Some annuities also have a right of survivorship for a spouse. Their main advantage is that you can’t outlive your income. Immediate annuities may also be used for Long Term Care solutions and to assist with an imminent Medicaid situation.

3) The fixed annuity – These are the most popular annuities because you control the money. In a way, a fixed annuity is like a super CD (Certificate of Deposit) except with more advantages. Until you take money out of one, the earnings are tax deferred just like an IRA (Individual Retirement Account). In fact, a large percentage of fixed annuities are IRA’s (funds transferred from IRA’s, 401k’s or other
retirement funds). The principal and interest are guaranteed by the insurance company. There is no probate and your heirs can receive the funds within a couple weeks. You are not penalized on your Social Security tax and there is no capital gains tax. There is ordinary income tax due when you take it out. In the case of traditional IRA’s, all distributions are taxable but the heirs have the option of “stretching the IRA” so the tax burden is spread out and the earnings continue to build.

Indexed annuities - are a type of fixed annuity with growth options linked to an index, such as the S&P 500 (Standard and Poor’s 500 leading companies), bonds rates, or the NASDAQ. The most popular ones currently are linked to the S&P 500. The advantage is that your account value increases on an annual basis if the market index goes up but doesn’t decrease if the market index goes down. In addition, even if the market index were to go down every year you owned it, there is a back-up guarantee of interest to be credited to your account.

Because you are not paying any fees or commissions to purchase an annuity and the companies are actually spending money to set one up, they protect themselves from anyone wanting all their money back before they’ve had a chance to at least break even. They do this with an early withdrawal penalty and that typically is spread over ten years with decreasing penalty each year. For example, a ten-year penalty would have a 10% penalty within the first year and it would go down each year after that, e.g. 10-9-8-7-6-5-4-3-2- and finally 1%. However, you always have some liquidity options. Almost all annuities offer 10% liquidity every year without a penalty. We have found that people rarely take out more than 10% in any one year because taxes would be a greater concern and their asset would not last as long as they had originally intended.

There are many facets to consider, and we provide a trustworthy assessment based on your needs. We never bill you, and no one has ever lost a dollar on an annuity acquired through us. Your secure retirement is our business.

Index or fixed annuities are not designed for short term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.


Site Map | Privacy

© 2007-2016 Nickson Secure Retirement. All Rights Reserved.
Serving Seniors in Seattle Washington metro area and the Eastside, including Bellevue, Kirkland, Redmond & Woodinville WA.