Individuals throughout the nation have billions of dollars invested in deferred annuities. These contracts offer many benefits most consumers are not aware of. Let’s look at a few of them:
• Keeping it Safe: Unlike a bank certificate of deposit (CD), deferred annuities are not FDIC insured; however, these accounts are backed by the billions of dollars in the insurance company’s assets and are considered a safe, low risk investment
• Compounded Interest: Earn interest on the principal and the amount you would normally pay in taxes each year on a CD. The bottom line is you will have more money to spend after retirement
• Guaranteed Minimum Interest Rate
• Competitive Interest Rates: Interest rates are often higher than what is currently being paid on CDs.
• No Sales Charges
• No Administration Fees
• Withdrawal Advantages: 10% of your account can be withdrawn without penalty each year. Withdrawals for terminal illness/nursing home expenses are also typically penalty free.
• Creditor Protection: In some states (including Florida) the money in your deferred annuity is protected from creditors
• Sheltered from Probate: In some states (including Florida) your annuity is not considered a probate asset which eliminates your beneficiary from probate fees or delays
• Distribution Options: Lump sum distributions, income for life options, or continued accumulation are just a few of the choices available.
Annuity withdrawals are generally taxed as ordinary income and may be subject to surrender charges in addition to a 10% federal income tax penalty if made prior to age 591/2.