Punjabi
New Member
Cash: $ 0.65
Posts: 3
Joined: 20 Aug 2012
Location: New England (via Punjab)
|
| How do annuities work? |
 |
|
I am contemplating getting an annuity for retirement down the line. I have a decent understanding of the types (immediate vs. deferred; fixed vs. variable). I also understand the tax implications vis-à-vis pre-mature distributions. I’m also aware of the payout options (period certain, lifetime, life with period certain).
What I am in the dark about is how I invest into this product. For example, Principal Financial has a minimum contribution amount $5,000 and there are two guaranteed interest rate periods (4 or 6 years) – This is where I’m confused. Am I to contribute at least $5,000 annually? Or is it a one time premium?
Secondly, what exactly do the two interest rate periods mean? How are these different than the Guaranteed Minimum Interest Rate (GMIR)? Any insight would be great.
|
Mon Aug 20, 2012 4:12 pm |
|
|
oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
|
I don't know the answers to your questions - but I'll share a general warning. Annuities have been horribly over-sold in the past - a few years ago Congress studied a bill on whether or not to establish warnings so that salespersons couldn't sell the inappropriate annuities to the elderly.
Personally, I avoid them, there are so many other better ways to invest that don't involve the obscene fees, the 'guarantees", the lock-in periods, etc. But if that's all that is available to you, I would use a fund provider such as Vanguard - and avoid the life insurance companies.
|
|
Mon Aug 20, 2012 5:57 pm |
|
|
clydewolf
Senior Member
Cash: $ 50.25
Posts: 248
Joined: 27 May 2012
|
| Re: How do annuities work? |
|
|
quote:
Originally posted by Punjabi
I am contemplating getting an annuity for retirement down the line. I have a decent understanding of the types (immediate vs. deferred; fixed vs. variable). I also understand the tax implications vis-à-vis pre-mature distributions. I’m also aware of the payout options (period certain, lifetime, life with period certain).
What I am in the dark about is how I invest into this product. For example, Principal Financial has a minimum contribution amount $5,000 and there are two guaranteed interest rate periods (4 or 6 years) – This is where I’m confused. Am I to contribute at least $5,000 annually? Or is it a one time premium?
Secondly, what exactly do the two interest rate periods mean? How are these different than the Guaranteed Minimum Interest Rate (GMIR)? Any insight would be great.
Punjabi,
I can not answer your questions. You may learn more at the links provided below.
Here is a link to FINRA discussing Equity-Indexed Annuities: http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/AnnuitiesAndInsurance/p010614
Here is a link to the SEC site that discusses Variable Annuities: http://www.sec.gov/investor/pubs/varannty.htm
|
|
Mon Aug 20, 2012 6:29 pm |
|
|
Punjabi
New Member
Cash: $ 0.65
Posts: 3
Joined: 20 Aug 2012
Location: New England (via Punjab)
|
| Thanks |
|
|
Thank you for the feedback, guys.
My initial question was whether or not it'd be a recurring premium or a one time -- I found out that the product I was contemplating (fixed, deferred) is a single premium vehicle.
I value the input from this forum's members, regardless. 
|
|
Wed Aug 29, 2012 8:14 pm |
|
|
|
