5 Questions about Index Annuities

In 1995, some U.S. insurers introduced Equity Indexed Annuity, EIA for short, which now have taken up one-third of the total annuity market. Back to the 2008 financial crisis in the U.S stock market fell sharply and Americans lost interest in 401K investment. Therefore, annuity products are favored. Index annuities have the following advantages:

1. Index annuities without market risk of decline.

The money in the index annuity calculates the rate of return each year based on the performance of the Standard and Poor's 500 Index, the index goes up, you go up, and the index falls, keeping your value unchanged. You can enjoy the benefits of a higher return when the stock market is up, and avoid your losses when the stock market falls. Now a lot of people in stocks, funds, have losses. They are gradually shifting money from the stock market to other less risky investments, and the break-even index annuity is one option. If you're nearing retirement or already retired, the stock market plunges and your 401K fund shrinks, it's going to have a big impact on your retirement, or even your inability to retire, and you're forced to continue working. Knowing this, we will know the importance of "keeping the capital open and not falling".

2. to provide account opening bonus (Bonus)

Index annuities at a fixed annual rate of 6% compound interest for 10 consecutive years, if 100,000 U.S. dollars invested, 10 years later to ensure that the roll to nearly 200,000 U.S. dollars, for the future to use a solid foundation for lifetime income. An insurance company gives a 12% bonus to open an account to grab the market, and you get 12% bonus on 4 times the money you put in.

3. Index annuities have the benefit of tax deferred tax.

The biggest benefit of an index annuity is tax-deferral, i.e. as long as it is not taken out, there is no tax problem. Simply put, the annuity buyer would have needed to use the portion of the funds used to carry out the tax to continue to make a profit, put the money into the annuity for 10 or 20 years, as long as it does not come out without paying taxes. But don't look down on "tax extension", the long-term power is very powerful, mainly reflected in three points: First, now you have income at work, retirement do not work, the average person's income will be reduced. Less income and lower tax rates. Now pay 28% tax, the post-retirement rate may be only 15%. Second, even if the tax rates are the same, would you like to pay taxes now or 20 years from now? It will be delivered after 20 years, of course. Because of inflation, the $10,000 in 20 years' time may be equivalent to 5000 yuan today. Third, since there is no need to pay taxes every year, it will be profitable, and the end result will certainly be better than the annual tax payment. Someone who changes jobs or retires can transfer the 401K and 403B of the former company to an annuity, and some people transfer their personal retirement accounts (IRAs) to an annuity, which is just a change of place, with no tax problems, no fines.

As with most retirement plans, annuities can be taken out after 59 and a half years old, and after 70 and a half years they have to take money out of the country, with a minimum requirement (RMD), 3.65 percent value at age 70, and increase by 5.35 percent by age 80. Why does the IRS have to dictate that you have to withdraw money when you arrive? Because retirement plans have the function of tax extension, if you don't take your money out, the IRS won't collect it.

4, guaranteed life-long retirement income.

Now insurers are adding "Guaranteed Income Lifetime Rider" to their annuities, and as long as the policyholder is alive, even if the insured's principal is fully exhausted, the insurance company will continue to pay the policyholder's pension every year/month at the original amount, living to the old age. According to statistics, more than 50 percent of people are over 85, meaning many people will retire longer, and even if you still need a fixed source of income after the age of 85, you can rest easy in retirement.

Example: Mr. Lin, 55, who transferred $300,000 from his former company's 401K to an index annuity, calculated at an annual interest rate of 6%, plus an account opening bonus of 12%, and started taking money at age 65, taking a pension of $28,706 a year for the rest of his life without worrying about running out of money. If you live to 90, you will receive a total annuity of $717,650. He originally invested $300,000 in his pension, and his final return increased by nearly $417,000.

5, allow the withdrawal of nursing home costs.

Many annuities include features that allow withdrawals under certain circumstances without being fined. Many annuity contracts allow the withdrawal of the same amount of care home without being fined if it is necessary to live in a nursing home.

6, property protection.

In many U.S. states, annuities prevent creditors from pursuing debt. If you are a doctor or in another hazardous industry, an annuity is a relatively safe saving.

7. Your child can inherit your annuity plan.

If the unfortunate person leaves early, the money left in the annuity will still be returned to the beneficiary/heir.