Annuities and Retirement Planning

Annuities are what....?

Annuity products come from major life insurance companies. They are a mix of investment and insurance, but are mostly considered when a person wants to build some cash for a long term goal, or to provide a monthly payment. Lots of people think about retirement when they consider these products, but some consider them for other savings goals.

Where Does Annuity Money Come From?

So how does the cash account get funded? An annuity will need to have a cash value in order to generate growth or income.

An immediate annuity is funded by one large sum at the start. Consider a retiree with a lump sum payout or a person who has inherited cash from a family member. This product, as the name implies, begins to make income for the owner right away.

Deferred annuities do not pay out right away. In fact, the owner may have to pay a penalty if he or she takes out cash before the term that is specified in the contract. There may be exceptions for this in the case of a severe illness, etc. Some may be funded with a large payment, or they may accept cash contributions made over a period of years. These are intended for people who are trying to plan for an event that is some time in the future.

Payouts - You can also find a variety of payout options. Some common examples are lifetime, joint survivorship, or 10 years. Their are many combinations of this too. For instance, some may have a lifetime payout with a guaranteed payout of ten years. That means that a beneficiary would collect income if the owner passes away before a decade ends.

If you are not sure that you will need the income, consider a flexible payout option. You can use this account to put aside money that could be used for an emergency if needed, or can be left to heirs if not needed.

Many people like annuities because of the favorable way that the IRS tax code treats them. They can grow in a tax deferred manner. They may be qualified or unqualified, which will affect the tax treatment of income payments.

Another advantage is the safety of fixed products. Fixed products may pay at a contract rate, or they may be pegged to a market index.

Take a large and famous market index like the S&P 500. When the market is up, the account will earn interest at a rate that follows that market rate. During down years, the account will be guaranteed to stay even, or even to earn a guaranteed interest rate.

Now that you understand a little bit about annuities, you probably want to know how long you can get payments for. You probably also want to know how large those payments will be. Of course this depends upon your accumulated cash value, growth rate, and the type of product you have.

We want to help you find the annuity products that can help you reach your goals. Use our Free Online Annuity Quotes to find the best retirement plan for your own needs. For more information, visit here: Explain Annuities

More HSA Health Savings Account Basics For Health Insurance

WHAT IS AN HSA or Health Savings Account?

I have divided this post up into three blogs. The first one is a basic outline so you understand the two parts of an HSA. The second part outlines some advantages to using a Health Savings Account Plan for your medical insurance. The last part tells you where to get more information!

Part 1: Is an HSA Health Insurance?

If you are shopping for health insurance, you have probably noticed a major medical insurance product called an HSA or Health Savings Account. An HSA is not actually insurance, but is an account that would be obtained with an HSA compatible Major Medical Insurance Plan. So we are talking about two parts of an HSA program here. One part is the Major Medical Health Insurance for your larger expenses, and the other is an investment, retirement, or savings account you can use on health purchases.

Part 2: Why would I want an HSA Account?

HSA plans make sense for many people. You can contribute, according to IRS guidelines to your HSA account. You will be able to deduct the allowable amount from your taxes. You can use this money to spend on any qualified purchases - some that might not even be covered by your major medical. However if you remain healthy, and do not need to take the money out - you keep it!

I have had clients who spent a considerable some on a lower deductible health insurance plan and then felt cheated because they had not used their plan very much. Well, I think that they were lucky to stay healthy! However, I can see their point. So I would be happy to give them the option to spend less on a much higher deductible health plan. That would also give them the security of knowing they will have health insurance in case of any major illness or injury! They can also choose to make contributions to their HSA, have a tax break, and know that if they don't have to spend the money, it will keep rolling over.

Part 3: Learn More About HSA's From Uncle Sam

I always like to go right to the Horse's...er Mouth ... when people ask me questions about taxes and/or the law. To learn more about HSA's you should go right to the Government.

Here is a link to the Dept. of the Treasury publication.