Income Annuities Investment Tips
Ideal for rollovers of other retirement investments, income annuities turn savings into steady, secure income. Income annuities supplement Social Security, pensions, and other retirement income while allowing the original investment to continue earning tax deferred. The best income annuities set minimum growth and payment amounts and investors then choose among options and “riders,” which adjust their earnings if interest rates increase or increase their payments to allow for rising cost of living.
In addition to historical data about annuity investments’ performance, investors should examine the credit ratings and share prices of insurance companies offering annuity investments. What’s more, investors should examine reports of recent annuity sales because sales trends give a barometer of experts’ recommendations and analysts’ best assessments.
During the fourth quarter of 2008, for example, sales of AIG annuities, which had enjoyed market dominance for years, dropped to the bottom of the charts even before the company’s serious financial difficulties became common knowledge. Meanwhile, sales of MetLife fixed annuities surged from 15th place to first, as MetLife continued offering attractive rates to new investors while other A++ companies cowered on the sidelines. Close behind MetLife’s record sales, sales of New York Life fixed annuities surged more than 20% as the company held a substantial portion of its assets in cash and sheltered others against market volatility.
MetLife and New York Life fixed annuity investments remain excellent values because the companies remain exceptionally strong and their investment strategies have held up well in the face of market turmoil.
MetLife Investors Fixed Annuity
Designed for long-term retirement savings, The MetLife Investors Fixed Annuity provides a steady stream of monthly, quarterly, half-yearly, or annual payments for life. Although technically a “fixed” annuity -- which guarantees both payments and growth rates -- the MetLife Investors Fund includes a “limited market value adjustment” comparable with interest rate increases built into a variable annuities. Investors lock-in an interest guarantee for one, three, five, seven, or ten years; the annuity contract refers to this time as the “guarantee period.” When the guarantee period expires, investors renew the annuity at no less than the initial rate or they take advantage of increased rates as the annuity’s investments yield greater earnings.
Initial investments over $25,000 earn 0.25% higher interest than smaller premiums and Federal and state income taxes on all interest earnings are deferred until they are paid out. Each regular payment includes a return of both principal and interest earnings, but only the interest earnings are taxable. The investor’s tax rate is established according to his retirement income, which is almost inevitably less than pre-retirement salary.
Investors may enhance the MetLife Investors Fixed Annuity with provisions for spouses and beneficiaries, including arrangements for continuing payments and death benefits. The Investors Fixed Annuity also offers greater than average liquidity because the contract allows for periodic withdrawals without “surrender charges.”
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New York Life Enhanced Fixed Annuity
Offering approximately the same advantages and options as annuity investments from its principal rivals (A++ insurers) New York Life’s Enhanced Fixed Annuity historically has paid between 0.05% and 0.075% higher interest than its competitors. Unlike several of its competitors’ offerings, New York Life Enhanced Fixed Annuity pays interest according to “banded” rates, which increase in proportion with premiums. Investors may put in as little as $5,000 and the company’s limit is $1 million. Money in the Enhanced Fixed Annuity grows without taxes and interest rates typically exceed earnings on similarly conservative investments—certificates of deposit or Treasury certificates. Most importantly, New York Life has retained superior ratings from all four industry analysts: A.M. Best has given an A+, meaning Superior; Fitch has given an AAA, meaning Exceptionally Strong; Standard & Poor's has given an AAA, meaning Extremely Strong; and Moody's Investor Services has given an Aaa, meaning Exceptional. As with other fixed annuities, New York Life’s Enhanced Fixed Annuity allows investors to determine when to receive payments, and as a result, when to pay taxes on their earnings. The Enhanced Fixed Annuity also features a death benefit provision.
The New York Life Enhanced Fixed Annuity gives owners two options many annuity investments do not include: A “10% Window” and a “Gain Window.” Under the terms of the 10% window, the annuity owner may withdraw 10% of the policy’s cash value on its last anniversary date without penalty. For an annuity investment over $100,000, the annuity owner may withdraw gains without any surrender charges.
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