Mayfield & Associates wants you to make an informed decision when you consider the purchase of an annuity. Annuities are an excellent tool to help you plan for your financial security. You can download a tip sheet to assist you in making the decision that is right for you. Annuities offer a variety of benefits including tax-deferred growth, ability to avoid probate, and lifetime income.
What is an annuity?
An annuity is a unique financial vehicle designed to help people either accumulate money for their retirement as in the case of an “investment annuity,” or turn their retirement savings into income, generally referred to as an “income annuity.” There are two types of investment annuities that may help individuals save for retirement: fixed and variable. Fixed and variable annuities offer tax deferral, a death benefit for loved ones, and the option to receive income for life in addition to other features and benefits that are specific to each. Note that tax-qualified plans already provide tax deferral so an annuity does not provide any additional tax benefits. Keep in mind that since they offer insurance and investment features, annuities may be subject to additional fees to which other tax-qualified plan funding vehicles may not be subject. All guarantees, including death benefit payments, are dependent on the claims paying ability of a selected vendor.
Types of Annuities
Traditional Fixed Annuity - Offers a declared fixed interest rate that is guaranteed for a specific period and guaranteed to never go below a specific percentage.
Fixed Index Annuity - Interest rate credited to your annuity contract is linked to specific market indices that you can choose on an annual basis. Once the interest is credited you are guaranteed that it can never go down based on future market fluctuations.
Immediate Annuity - You are guaranteed an income stream ranging from a specific period of time to your entire life. An immediate annuity offers a solution to the problem of outliving your money.
Why Choose an Annuity
Tax-deferred growth allows your money to grow faster because you earn interest on dollars that would otherwise be paid as taxes. Your principal earns interest, the interest compounds within the contract, and the money you would have paid in taxes earns interest. The chart to the right shows the impact of a tax-deferred annuity.
May Avoid Probate
Annuities offer the ability to name a beneficiary, which may minimize the expense, delays, and publicity that comes with probate. Your named beneficiary may receive death proceeds as either a lump sum or monthly income.
Midland National can provide you with a guaranteed income stream with the purchase of a tax-deferred annuity. You have the ability to choose from several different income options, including life or a specific period. With non-qualified plans, a portion of each income payment represents a return of premium that is not taxable, reducing your tax liabilities.
1. Chart is a hypothetical example of tax-deferral and assumes an initial premium of $100,000 earning 4.00% compounded annual rate of return for 15 years. Not intended to predict or project performance.
*Tax-deferred value less taxes represents the increase in value, due to tax-deferral, less taxes at an assumed rate of 33% with no surrender charge or Interest Adjustment applied.
Steps to building a personalized Annuity in Gulfport, Biloxi, Long Beach, Ocean Springs, Hattiesburg, Jackson & Pascagoula, Mississippi as well as Texas, Louisiana, Alabama, Tennessee & Florida.