Group Health Plans of La.
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Are Annuities Better Than C D's
guarantee an income that you will never outlive
considerably more attractive liquidity features than any CD.
Most CDs give you five to seven days at maturity to withdraw or roll the assets over
Tax-deferred income doesn’t count toward the IRS’ provisional (retirement) income levels. Simply having tax-deferred income coming in after 65 can save money on taxes. While pension income, interest, tax-exempt income and 50 percent of Social Security benefits count toward provisional income, tax deferred income does not.
If your provisional income (married, joint filing status) is:
• $0-$32,000 you pay no Social Security tax.
In other words, if you receive $24,000 a year from Social Security and have $15,000 of CD interest income, you are going to give up a healthy portion of that to taxation. Move those CD assets into a deferred annuity and the tax goes away.
While the interest rate on a fixed annuity is nominally higher than a CD, it’s the triple compounding features that makes a fixed annuity shine. Specifically, an annuity owner earns interest on his principal the first year. In the second year, since a tax-deferred annuity doesn’t pay taxes annually, the owner earns interest on the principal, earns interest on the interest he earned the first year plus the money he would have had to pay in taxes the first year. From there, the compounding takes off.
Annuity bonus features
add dramatically to the yield, leaving CDs far
The safety features of fixed annuities is that in most states , the state guarantee fund insures them to some limit. ($100,000 in Louisiana) (State Guarantee Funds)
Normally, annuities avoid probate if the beneficiaries are set up properly.
Annuities taken as an annual or monthly income are favored by a return of principal exclusion called the "exclusion ratio" which can shield up to 85% of your income from taxation.
Because of the competitive insurance environment, most annuities come equipped with several options and additional choices at time of purchase, including, but not limited to:
Transfer of ownership between spouses.
Nursing care waiver rider which increases the penalty-free withdrawal
Terminal illness waiver allows the owner to withdraw up to 75 percent
Unlimited contributions. Unlike CDs you can add to your annuity at any time.
All benefits are guaranteed available to age 100 (95 in some cases).
Full or partial tax-free transfer privileges to another annuity.
A free cancellation period — AKA a “free look” period — allows
you to change
Guaranteed convertible to a monthly income stream for life or period certain.
The entire accumulation value of an annuity can be available upon death.
Current law does not allow for CDs to transfer to other CDs without penalty. Under IRS Reg. 1035, deferred annuities are exchangeable to other deferred annuities or to other immediate annuities. Tax deferral (interest/earning accumulations) and other tax benefits are exchanged. This means the annuity contract basis (non-qualified contracts) gets transferred to the new deferred or immediate annuity contract.
Annuities can be creditor exempt. Buy them early and often, so there is never any doubt as to the intent of the transaction. Like all other matters of insurance, you need to have the policy in place before you need the benefits, otherwise, you might find out that you are just too late.
CD assets are not protected from creditors — and banks often suggest that couples hold CDs in joint tenancy, resulting in another vulnerable asset in case of lawsuit, divorce, etc. — annuities do offer some protection from creditors.
Ira/Sep plans are generally exempt from creditors, as is most cash values in Life Insurance Policies.