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Important Note:

June through November our agency may become prohibited from binding coverage should a “Tropical Disturbance” enter the Gulf of Mexico or Caribbean Sea.

In these cases we may be unable to bind new coverage quoted in open proposals until the storm leaves our area and our binding authority has been restored.

Please arrange your coverage protection early to avoid this type of delay. While we regret any inconvenience, the carriers impose these restrictions on all agencies.

Understanding Annuities

When interest rates are low, investors may see annuities—products in which you pay money to an issuer and they then pay you back in principal and earnings—as less desirable. However, according to data from LIMRA Secure Retirement Institute, total U.S. annuity sales still rose 3 percent in 2014—reaching a total of $235.8 billion.

Indexed and income annuities were particularly popular among last year’s investors. If you have yet to consider adding an annuity product to your own portfolio, start by reviewing the basics.

What makes annuities attractive?

In part, annuities are attractive to investors because earnings are tax-deferred until you begin to collect payments. The longer you leave your investment before beginning to draw principal and interest, the larger it can grow. Like a qualified retirement plan—such as a pension or a 401(k)—you’ll pay a 10 percent tax penalty if you begin withdrawing funds from your annuity before you reach the age of 59.5.

Who is involved in an annuity?

Every annuity contract requires four parties. These are the:

  • Annuity issuer (insurance company)
  • Owner (purchaser of the annuity)
  • Annuitant (usually the owner, person whose life determines the timing and amount of benefits)
  • Beneficiary (person who will receive a death benefit when the annuitant dies)

How does an annuity work?

In most cases, annuities have two phases: the investment phase and the distribution phase. The investment phase—also known as the accumulation phase—is the period during which the owner adds money to the annuity. This may be in one lump sum or as periodic investments over time.

The distribution phase is when the annuity issuer begins making distributions from the annuity to the owner. This may be done as a lump sum, a guaranteed income stream for the lifetime of the annuitant, or a specific period.

An immediate annuity allows you to invest and begin receiving payments within the first year. A joint and survivor annuity allows for the distribution of payments over your lifetime and the lifetime of another person.

The amount you can receive from an annuity depends on how much you’ve invested, the interest rate, how earnings are credited to your account (for example, fixed or variable), the age at which you begin the distribution phase, and the length of the distribution period.

Is an annuity a good investment for me?

Annuities are not right for everyone, but they can be an excellent investment tool if used properly. Because contributions are not tax deductible, many financial planners recommend you make the maximum allowable investment in your other retirement plans before buying an annuity.

Annuity products are designed as very long-term investment vehicles. If you think there’s a chance you’ll need to withdraw early, another investment option may be a better choice. Otherwise, you’ll pay tax penalties and possibly even surrender charges imposed by the issuer.

Whether you’d like to explore annuities further or need other financial advice, please give us a call. We’re here to help you with all of your investment and retirement planning needs.