Over the past several weeks you may have heard advertisements regarding the negative aspects of owning an annuity. These advertisements probably pointed out the negative tax implications, restrictions on the availability of funds and the poor return on investment.
While these commercials are primarily aimed at variable annuities, Hermann Sons Life offers only fixed annuities. A variable annuity generally tracks your investment return to some stock index yield or other index. Our fixed annuity promises you an annual return that can be adjusted each year.
Hermann Sons Life annuity products are designed to work around the objections raised in these commercials, and offer good value where appropriate for persons choosing a fixed income investment vehicle.
The advantages of a fixed annuity with Hermann Sons Life are many but here are a few to consider.
A Hermann Sons Life fixed, deferred annuity provides safety of principal because our products offer a minimum guaranteed rate of interest, currently at 1.5 percent, and are a simple safe conservative vehicle for growing your money. Hermann Sons Life annuities typically are the smart choice for the risk adverse investor, offering a logical alternative to CDs. Our five-year annuity offers 2.6 percent, while the nine-year offers 2.8 percent, which are attractive rates, with much lower minimum deposit requirements than most CDs.
The investor looking to establish a qualified tax deferred annuity may do so with an initial deposit of as little as $500, or a maximum of $100,000 first year contribution ($20,000 per year thereafter).
Our non-qualified products can be established with as little as $2,500, or a maximum of $250,000 first year contribution ($150,000 per year thereafter).
Annuities, like other retirement investment vehicles, grow tax-deferred. You earn interest every year, but unlike a CD you are not taxed for it. Qualified plans, like traditional IRAs, may allow you to deduct contributions from your gross annual income, thus decreasing your tax exposure. The advantage is that your savings grow faster than they would if your gains were taxed every year.
The longer you defer taxes, the better – especially if you plan to retire in a lower tax bracket. With the anticipated reduction of tax rates and higher standard deductions (waiting to be approved by Congress as of this writing), in the past this tax deferral has been beneficial to many annuity holders.
And, if in future years you prefer some other annuity product, it can be transferred to another deferred annuity while continuing its (tax) deferred status.
Hermann Sons Life sets its rates using a conservative approach. We strive for stability. The rate set by the company and current upon your annuity’s anniversary is the rate you will earn for the next year. Every year provides an opportunity for rate increases. But don’t forget, we can never go lower than your contract’s guaranteed minimum rate. Those close to retirement can rollover qualified plan funds into an IRA, and not worry about adverse market fluctuations or being forced to alter plans for enjoying the future because you lost part of your nest egg.
Many retirement plans have some sort of fee structure including front-loading, annual maintenance, administrative, management and change order fees. Our only fee is a $5 check fee for withdrawals on the nine-year annuity. Our agents earn a small three percent commission on first-year contributions only, which is not subtracted from your principle.
Use as a death benefit and avoid probate
Not many people could get excited about a benefit triggered by your own demise, but annuities are famous for them. If you die while owning a fixed annuity, your money goes straight to the beneficiaries listed in your contract. The money, because you name your own beneficiary, doesn’t go through probate (the legal process), where creditors and relatives can lay claim to it. The money goes directly to your beneficiary. In addition, your spouse can invoke what is known as a spousal rollover, and your savings become their individual annuity. This does not trigger a taxable event.
Although an annuity death benefit may be a taxable event for the beneficiaries, it is a viable alternative to those who find themselves uninsurable due to age or poor health.
Retirement Income - Annuitize
Like all annuity contracts, a fixed annuity can be converted to a retirement income stream. Although this option is the defining feature of annuities, few people know about it or care about it and even fewer use it.
Annuities are a good choice to consider if you are worried about outliving your available assets. If you need the money after the first year you purchase the annuity, you can withdraw 10 percent per year penalty free during the early surrender penalty years (five or nine years, depending on the plan). This feature allows for some degree of liquidity in the first few years of the annity for unexpected or expected financial needs, such as emergency house repairs or a vacation.
If you are looking for a conservative investment which is straightforward and easy to understand, offers a fixed rate of return with safety and stability of principle, allows limited access to your funds for emergencies and provides low fees, a Hermann Sons Life fixed annuity may fit your needs.
Contact your area agent or the Home Office today, and we’ll be glad to discuss how our annuities can be a smart investment choice.