Fixed Income Annuity Provides Tax-Deferred Growth
Feb 9, 2010 insurance banking
Fixed annuities can often cause people a fair amount of stress when they try and determine the tax treatment. And even though this process can seem a bit too much to handle, the underlying concepts are actually quite simplistic. A fixed annuity is a contract with the insurance company in which you make premium payments and they agree to provide you a fixed income for specified number of years.
One of the most beneficial aspects of the fixed income annuity is the fact that you may receive payments out of the annuity for the span of the contract or the lifetime of the annuitant. These life annuities can provide a guaranteed income throughout the whole duration of your retirement.
On the surface, the tax treatment of fixed annuities is rather simple. In is when you dig into the details that the more complicated parts can emerge. Plainly stated, most annuities have tax-deferred growth, and are taxable upon payment distributions.
Tax-deferred growth means that any growth inside of the annuity account is not taxable until it is distributed to the beneficiary. This growth can provide very significant gains to the overall account value.
Every annuity payment is separated into two categories, nontaxable and taxable. To determine the taxable portion of the annuity distribution, you must first calculate the exclusion ratio. The exclusion ratio is calculated by dividing the investment amount in the annuity by the total amount expected to be received through payments. Each prospective distribution is then multiplied by the ratio to determine the taxable portions.
The portion of the contract that is non-taxable is generally the premiums paid, minus the previous non-taxable distributions and minus the value of any period certain or guaranteed features of the particular annuity contract.
Fixed period contracts are typically easier to calculate than life annuity contracts. In life income annuities, the expected payout amount used to calculate the exclusions ratio is based on life expectancy tables from the U.S. Treasury Department.
Despite the various disadvantages that fixed annuity contracts have, this type of insurance product can be a very effective retirement planning tool. The lifetime income and ability to preserve capital for the duration of your retirement is a very appealing feature of the product. Add in the various tax advantages, and the fixed annuity can be a quite useful financial planning tool.
Be sure to check out Brian Atkinson at The Fixed Annuity Guide to learn more financial planning topics. The fixed income annuity can be used in creative and powerful ways.
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Instant Whole Life Insurance Quote
Dec 26, 2009 insurance banking
Through the years sustenance of human life has become more difficult and complicated and many factors have influenced this condition. One of these is the increasing population which tend people to become a competitor to each other in obtaining their basic needs. Another factor is the escalating risk in our living environment because of the unabated destruction of the natural resources of the planet earth. The effect of all these factors towards human being is an increasing cost of sustaining life and a secured future.
Since physical journey is similar to life’s journey, I guess many will agree that you should prepare also extra amount of money that will answer to these incidents and the best way to get ready is to get life insurance. Life insurance is commonly called term life insurance which offers coverage payment at a fixed rate for a limited or specific period of time. The term insurance is the original form of insurance which has transformation into some variants such as permanent life insurance, universal life and variable universal life.
The permanent life insurance guarantees coverage at fixed rate of premiums for the lifetime of the insured person and in some cases it provides a predetermined cash value over the life of the contract which can be withdrawn by the client under specific conditions.
However, the term insurance has a distinct disadvantage for the insured person because when the period of coverage expires its prior rate of premiums is no longer applicable which if he will renew it, he will have to pay the current rates which are normally higher. Hence it is advisable that if you are looking towards secured lifetime coverage and to be able to get some monetary advantage you should buy a permanent life insurance.
The term insurance operates in the same way as other most insurance because it fulfills claims against what is provided in the coverage as long as the premiums are up to date and the contract is not expired. Because of so many competition and introduction of new product variants the term insurance rates have been gradually declining and though for people who have limited budget this is the appropriate insurance to buy just to fill up the gap of uninsured period.
With the advancement of the telecommunication and information technology you need not to go around town to get insurance quotations. Perhaps many are not aware that at your finger tips you can access insurance website and request for an instant whole life insurance quote which will only require your basic personal data such as name, date of birth, including the year, address and the like. The following are the benefits of getting an instant whole life insurance quote:
*You can customize your policy by selecting only what you need.
*You can compare several quotes from various life insurance providers.
*No detailed personal information for your free quote.
*You need not call for quotes as it is available online.
*There are no medical exams, only a few health questions.
Generally the term life insurance cost is not that expensive if you will view it from the perspective of protection throughout the lifespan of the insured person. In addition for many insured people that the most treasured value of having insurance is not only of getting an amount in time of needs but it is the value from having a peace of mind in offsetting the adverse financial consequences caused by the death of the insured.
Learn more about Term Life Insurance Price. Stop by Christopher Eyres’s site where you can find out all about whole term life insurance and what it can do for you.
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