Prosperitas Financial & Insurance Advisors
Planning, preserving and protecting your future
Tax-Deferred Fixed Indexed Annuities
You may be surprised to learn that according to government disclosures, recent Federal Reserve Chairman Ben Bernanke himself, has the majority of his liquid wealth -between $1 million and $2 million dollars- invested in fixed and variable annuities, which are contracts issued exclusively by life insurance companies. The Federal Reserve Chairman oversees the banking industry, yet he did not choose to put his own money with the banking industry (C.D.s or mutual funds), instead he chose annuities to grow and protect his money.
What's more, 22,000 Federal Reserve System employees chose to put 75% of their 401K Thrift Plan assets- approximately $3.2 billion dollars- in a fixed income fund, which is invested exclusively in annuity contracts underwritten by major U.S. life insurance companies. Contributions allowed into annuities are much larger when compared to other plan limits, and taxes are deferred until distribution. Currently, there are more than 240 different indexed annuities available from over 44 different providers.
Annuity Basics
You make an investment(s) into an annuity for a specified period of time. On a future date or even a series of dates, the annuity returns a payment or a series of payments back to you. The income that you receive can be paid out monthly, quarterly, annually or in one lump sum. You may opt to receive an income that can be guaranteed for the rest of your life, or for a specified number of years.
Section 1-Comparison of annuities and mutual funds.
Section 2-Comparison of annuities and bank CDs.
Section 1 - Mutual fund comparison
Upside Potential
Annuities and mutual funds can both take advantage of market increases depending on fund choices. With a fixed indexed annuity, when the market performs well, you get to share in those gains up to the annuity cap. The rates are declared annually, and both the declared interest rates and the cap rates vary from company to company.
Downside Protection
Shielding investors from negative stock market performance is the largest advantage of fixed indexed annuities over mutual funds. Market declines directly reduce the value of mutual funds. As a matter of fact, over the last ten years, billions of dollars have evaporated from mutual funds and 401K plans. At the height of the recent economy downturn in 2008, over 99% of all mutual funds lost money. With our annuities you can not lose money due to a market decline, and all account gains are locked in annually.
Bonuses
Many insurance companies offer bonuses on new accounts to attract new clients. Bonuses vary greatly from one company to the other. Typically the larger the initial deposit, the larger the bonus. After a period, usually several years, the bonus money is completely vested and belongs entirely to the annuity owner. Mutual fund companies do not offer bonuses for new accounts.
Section 2- Bank CD comparison
Higher Returns
Typically, annuities offer a higher rate of return when compared to bank CDs. With fixed indexed annuities, you can choose either a stated fixed rate or you may choose a return based on market indices such as the S&P 500 index. You are also allowed to split your contributions between these options, and you can even change these allocations every year if desired. Either way, you never risk losing your money and your gains are locked in annually.
Liquidity
With most bank CDs, if you have a financial emergency and break the contract early, the bank will charge you penalties. In some cases, you may even lose money due to these penalties. With the annuities that we offer, after the first year you may take up to 10% of your account value out- in any given year for any reason- without penalty. This can be done again the next year, and again the next year and so on.
Deferred Taxes
With most bank CDs, you will have to pay taxes each and every year on any gains. With tax-deferred annuities, your money can grow free from that annual taxation. Instead of that money going to the IRS, it stays in your account to earn and grow. This is called compounding earnings, and it can make a big difference in your account value when you eventually need to access that money.
Members of Alliance Group.