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Annuity

Annuity is the key to a worry-free retirement. Let's start saving for your retirement!


Fixed Annuity

Overview:

  1. Fixed annuity is like a CD account but with higher interest rate.

  2. A minimum of $5,000 USD is required to open a fixed annuity account

  3. There is no account establishment charge, management fee, or closing fee for the fixed annuity account.

Suitable for :

Fixed annuity is suitable for people who are conservative with low risk tolerance and age 55 or older.

Variable Annuity

Overview:

  1. More than 60 highly rating funds are available to choose from, including reliable and reputable companies such as Mainstay, PIMCO, Morgan Stanley, and Fidelity, etc.

  2. Mortality & Expense Fee (M&E) is about 1-2%. No extra fee for multiple reallocations.

  3. No return cap, but applicant is responsible for both gains and losses. There are protection riders available for additional charge.

  4. Lump sum payment or installments are available.

Suitable for :

People with higher risk tolerance, younger investors, or people with ROTH IRA.

Income Annuity

Overview:

  1. Guaranteed lifetime income with no risk

  2. Receive income as long as you live

  3. If there are two annuitants, the survivor spouse will still continue to receive income.

  4. Lump sum payment or installments are available

Suitable for:

Additional lifetime income for retirement

Indexed Annuity

Overview:

  1. A fixed interest annuity, the insurance company distributes interest rate based on the stock market index’s performance such as S&P 500.

  2. Not direct investment. Return is determined point-to-point annually with gain cap.

  3. Long surrender period, usually 10 years or more with high surrender charge.

  4. Lump sum payment or installments are available.

Suitable for :

People who expect higher interest rate than standard Fixed Annuity

Q&A

What is the tax advantage of annuities compares to investment accounts, mutual funds, and CDs?

If the owner’s principal amounts are in an investment accounts, mutual funds accounts or CD accounts, losses will reflect on the principal and potentially leaving the beneficiaries with less money than the original principal amounts. Annuities on the other hand will guarantee the principal amounts and the beneficiaries will not receive less money even with losses.

What are the tax benefits that annuities have compare to investment accounts?

All dividends and interests of other investment accounts, mutual funds accounts, or CD accounts are taxable for the tax filing year. As for annuities, interests and dividends are non-taxable unless there is a withdrawal from the account. As long as there is no withdrawal, annuity’s interest or dividend is non-taxable. For example, the money you contributed to your annuity account at age 30, no matter how much interest or dividend is earned, everything is tax-deferred until you start taking money out of the account at age 60.

What are the different ways to setup an annuity and what are their tax benefits?

There are two ways to setup annuity:
  • Qualified account: Before-tax contribution to the account is tax deductible for that current year except for ROTH IRA. Both the principal and the interest are tax-deferred. However, there is a 10% penalty for withdrawal before the age of 59 1/2. Also, when you reach the age of 72, you are required by the IRS to start taking Required Minimum Distribution (RMD) from your account.
  • Non-Qualified account: After-tax contribution to the account is not tax deductible. Only the interest is tax-deferred. There is also a 10% penalty for withdrawal before the age of 59 1/2, but there is no RMD requirement

Does annuity require a physical exam?

No, only Social Security Number or Tax ID is needed.