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We structure part of your retirement strategy into annuities. Based on your life stage and retirement goals, we plan your retirement through innovative annuity solutions.

What Is an Annuity?


An annuity is an insurance product designed to provide consumers with guaranteed income for life.

An annuity contract is a legally binding, written agreement between you and the insurance company that issues the contract. This contract transfers your longevity risk, the risk of you outliving your savings — to the insurance company. In exchange, you pay premiums as outlined in the contract.


How Do Annuities Work?


Annuities work by converting a lump-sum premium into a stream of income that a person can't outlive. Many retirees need more than Social Security and investment savings to provide for their daily needs.

Annuities are designed to supply this income through a process of accumulation and annuitization. In the case of immediate annuities, lifetime payments guaranteed by the insurance company that begins within a month of purchase — no accumulation phase necessary.

When you buy a deferred annuity, you pay a premium to the insurance company. That initial investment will grow tax-deferred throughout the accumulation phase, typically anywhere from ten to 30 years, based on the terms of your contract. Once the annuitization, or distribution, phase begins (based on your contract terms), you will start receiving regular payments.

Annuity contracts transfer all the risk of a down market to the insurance company. This means you, the annuity owner, are protected from market risk and longevity risk, that is, the risk of outliving your money.

Insurance companies charge fees for investment management, contract riders, and other administrative services to offset this risk. Most annuity contracts include surrender periods during which the contract holder cannot withdraw money from the annuity without incurring a surrender charge.

Insurance companies generally impose caps, spreads, and participation rates on indexed annuities, each of which can reduce your return.


Annuity Options:

The two basic configurations of annuities are Immediate or Differed. Based on your retirement needs, you chose money now or money later. If you want to begin receiving annuity payments right away, you will choose an immediate annuity. Alternately, if you would like to set your payments to start in the future, you will purchase a deferred annuity.


Immediate Annuities:

Single-Premium Immediate Annuity (SPIA): A SPIA is a contract between you and an insurance company designed only for income purposes. Unlike a deferred annuity, an immediate annuity skips the accumulation phase. It begins paying out an income either immediately or within a year after you have purchased it with a single, lump-sum payment. SPIAs are also called immediate payment annuities, income annuities, and immediate annuities.



  • It is funded with a single lump-sum payment.

  • It guaranteed monthly payouts.

  • Supplement your retirement savings.


Differed Annuity:

A deferred annuity is an insurance contract that guarantees income at a future date. Deferred annuities income payments are delayed until the date specified in the insurance contract. Earnings on the premium grow tax-deferred until the money is withdrawn. Deferred annuities allow your principal to increase before you begin to receive the stream of payments. Typically, annuities, such as qualified longevity annuity contracts, are bought for future retirement income.

According to the LIMRA Secure Retirement Institute, deferred annuities are forecast to have the most considerable growth rates over the coming years.



  • Tax-deferred premium growth.

  • Guaranteed lifetime income that begins on the date you specify.

  • More income later because your money accumulates longer.


Types of Annuities:

Your personal goals and objectives will determine the type of annuity that is right for you.


Guaranteed Income Fixed Annuity:

Fixed annuities are the simplest and most straightforward type of annuities. They also provide the most predictable and reliable income stream, usually with the lowest fees.

A fixed annuity can be immediate or deferred. That is, depending on your annuity contract, you may start receiving annuity payments within a year of purchasing your fixed annuity, or you may have the payments start later. Deferred annuities typically start payments at retirement.



  • Earns a guaranteed rate of interest for a set period.

  • The rate of interest may be guaranteed for a set period or may fluctuate from anniversary to anniversary.

  • It's backed by the insurance company that issued it.


Fixed Indexed Annuity:

An indexed annuity, also known as a fixed-index annuity, is a type of annuity whose income payments are tied to a stock index, such as the S&P 500. Indexed annuities perform well when the financial markets function well. People often refer to indexed annuities as hybrids of fixed and variable annuities.

Index annuities carry what's called a guaranteed minimum return. Typically, this means if you buy an index annuity, you are guaranteed to receive at least a certain amount – usually at least 87.5 percent – of your principal back, plus 1 to 3 percent interest. If your index performs consistently well, you have the potential to earn a higher return than traditional fixed annuities.



  • Earns interest based on a market index, like S&P 500

  • Doesn't participate directly in the stock market and preserves premium.

  • A guaranteed minimum rate of return


Variable Annuity:

A variable annuity is a type of annuity whose value is tied to an investment portfolio's performance. Payments from variable annuities can increase if the portfolio performs well and decrease if it loses money. Although variable annuities carry the potential of higher returns than fixed annuities, they don't offer a guaranteed payout.



  • Earns interest through investments you select within the annuity.

  • It does not guarantee a return but offers more growth potential.


Why Buy an Annuity?

Annuities create long-term income. Annuities can investors both young and close to retirement to achieve financial goals.


Annuities Offer:

  • Long-term security

  • Tax-deferred growth

  • Principal protection

  • Probate-free estate distribution

  • Inflation adjustments

  • Death benefits for heirs


Annuity Benefits:

  • Tax-Differed growth

  • No Contribution limits

  • Predictable retirement income for life

  • Death benefits are provided to your beneficiary.


Risks & Caution:

Just like any investment vehicle, there are risks associated with annuities.

  • If you are not an expert and don't know what to look for, often there are hidden fees, early surrender fees, administration fees, and other hidden junk fees. That's why you need an experienced, honest broker who will look out for your financial wellbeing.

  • Not all your retirement should be in annuities; based on factors like tax bracket, monthly income needs, asset allocation strategy, risk tolerance criteria, a portion of your retirement invested in annuities might be a wise move.



Our Debt Free Program is an innovative, customized insurance solution that builds a cash value over time. As your cash value grows, you eliminate all your debt incrementally and save the balance for retirement – without spending any additional money. Typically, our clients can eliminate their debts like mortgage, auto loans, student loans, credit cards, etc., in 9+ years or less.

With Debt Free Life, you can create a long-lasting legacy for your family by achieving financial freedom and retiring with tax-favored income. The earlier you begin your journey to financial independence, the more significant results you will see. Contact us; one of our licensed agents will conduct a full financial evaluation and plan a roadmap for you.



Our Public Employee Program specializes in customized retirement planning for Public Employees (law enforcement, corrections, and first responder professionals.) Retirement doesn't need to be a point of stress or confusion. Our program makes it simple. 403(b) retirement plans, retirement income savings, 401k rollovers, tax-free retirement supplementation, and public employee pension support are available to ensure your retirement experience is a positive one.

We concentrate on ways to save you money in retirement utilizing a collection of financial and insurance plans to protect our clients in 4 key areas:

1. Protect your family/income.
2. Protect you from market risk - Link for market risk definition.
3. Protect yourself from unnecessary taxes.
4. Protect you from outliving any of your supplemental retirement dollars.



Insurance companies offer investment contracts, called annuities, that can be settled to provide guaranteed annual payments. The payments' size depends on how much money is put into the annuity and the terms under which the contract is agreed. Typically, annuities are used to guarantee payouts from a retiree's nest egg. With some creativity, they can be used to fund other ongoing costs, such as college.


Paying Tuition:

The most straightforward way of paying for college with an annuity is to settle an annuity on a limited payout schedule to make payments that cover tuition. You'll have to contribute a significant amount to have a sufficient balance to have the payout you'll need. With one of our licensed agent's assistance, you can figure out how much you'll need to invest so that the annuity payouts will cover tuition payments.


Paying Off Student Loans:

When the stock market is performing well and interest rates are low, you could make better use of your investment by letting it grow and borrowing the money instead. For example, if your annuity is growing at 16 percent per year, and student loan rates are at 3.4 percent per year, by taking money out of the annuity to pre-empt taking out student loans, you're taking a massive hit in terms of return. Student loans are usually set on a 10-year repayment schedule beginning six months after graduation. Adjusting your annuity to pay out for 10 years and cover your student loan payments allows you to take advantage of the superior returns from the market.

When contrasted with a 529 plan, College Annuities has a couple of benefits. One is flexibility. Suppose your child decides against going to college. Any earnings in your 529 account, but not your contributions, will be subject to ordinary income tax rates and usually a 10% tax penalty if you decide to withdraw them. Some plans allow the beneficiary, generally in a lower tax bracket, to withdraw the funds. But it's still a significant tax hit that annuity owners don't have to face. You also have the option of naming another relative as the 529's beneficiary.

The other advantage of College Annuity is that it's not included in financial aid calculations. By contrast, the money in a 529 plan is considered a parental asset. Up to 5.64% of parental assets are counted in the applicant's Expected Family Contribution for each college year.


529 Plans:

529 college savings plans are the most popular option when saving for college. If you're thinking about opening a 529 plan for a child or grandchild, it's essential to understand 529 plan rules and how they work.

  • 529 plan investments grow on a tax-deferred basis. Distributions are tax-free (only  when used to pay for qualified education expenses, including college tuition and fees, books and supplies, some room and board costs, up to $10,000 in K-12 tuition per year, and up to $10,000 in student loan repayment per beneficiary and sibling.) Qualified 529 plan distributions are excluded from state taxable income, and many states offer a state income tax deduction or state income tax credit for 529 plan contributions.

  • 529 plans are low maintenance. Most families prefer to "set it and forget it."

  • Unlike a Roth IRA or Coverdell Education Savings Account, 529 plans have no annual contribution limits and high aggregate limits. Maximum aggregate limits vary by state. 529 plan contributions are considered completed gifts for tax purposes, and up to $15,000 qualifies for the annual gift tax exclusion. There is also an election to contribute as much as $75,000 in one year without generating a taxable gift if the contribution is treated as if it were spread over five years.

  • 529 plans owned by a dependent student's parent or a dependent student are reported as parental assets. They have a relatively minimal effect on financial aid eligibility. Distributions from a 529 plan owned by a dependent student's parent or a dependent student are not counted as income on the Free Application for Federal Student Aid (FAFSA).



  • 529 plan funds must be spent on qualified expenses to avoid tax and penalty. Non-qualified distributions are subject to income tax and a 10% penalty on the distribution's earnings portion. However, there are exceptions to the penalty if the beneficiary gets a scholarship, attends a U.S. Military Academy, dies, or becomes disabled.

  • State income tax benefits may be recollected if you switch 529 plans. If a 529 plan account owner does a rollover into another state's 529 program, any state income tax deductions and credits previously claimed may be subject to recapture, and the earnings portion of the outbound rollover may be added back to state taxable income.

  • Some 529 plans offer limited investment choices. A 529 plan account owner must select from a list of investment options offered by the 529 programs. This typically includes fixed investment portfolios that aim to achieve a targeted level of risk, individual fund portfolios, and age-based portfolios that automatically shift asset allocation as the beneficiary gets closer to college.

  • 529 plans may have high fees. The more families pay in 529 plan fees, the less they can save for college. Direct-sold 529 plans are less expensive than advisor-sold 529 plans, but expenses can also vary among 529 plan portfolios. It's essential to research your options and find a low-cost 529 plan option that meets your college savings needs.

  • 529 plans owned by a third-party can hurt financial aid eligibility. A 529 plan owned by a grandparent or anyone other than the student or parent is ignored on the FAFSA (but may be considered on the CSS Profile). However, distributions from a 529 plan owned by a third-party are counted as untaxed income to the student and can reduce the student's financial aid eligibility. To avoid this negative impact, grandparents can time the 529 plan distribution to not count on their grandchild's FAFSA.

Key Takeaways

  • 529 plans and permanent life insurance are two ways to create college funds for kids.

  • A 529 plan allows you to save and invest on a tax-deferred basis, and withdrawals are tax-free if you use them for qualified educational expenses.

  • College Annuities include both a death benefit and a savings account. You can borrow against the savings portion to pay for college.

  • The downside of a 529 plan is that it counts as an asset when you apply for financial aid, while a life insurance policy does not.

College Annuity or 529 Plan?

It depends on many factors like savings goals, time, risk factors, tax brackets, etc. a lot of clients will do a hybrid option of both plans to hedge against market risk. Please speak with one of our licensed agents for a comprehensive evaluation and guidance.


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