How is a deferred annuity taxed
Tax Deferred Annuity - What are tax deferred annuity plans?
eze ago and everyone my name is derek
ifasi I'm the owner of a Fawcett
Financial Group today's topic I want to
discuss with you deferred annuities are
the different types of deferred
annuities why somebody may want to get
involved with a deferred annuity and
kind of the pros and cons of each
deferred annuities are income for later
it's not it's not immediate income so
what happens as individuals typically go
into deferred annuities if they
understand okay I'm not going to be
retiring right now but maybe in you know
fifteen years ten years five years
however many years out there and they
want to they want some sort of
guaranteed retirement income at a later
date and time so what happens is
essentially the money that you place
within a deferred annuity is going to
have certain gains that will grow
deferred and and meaning that it's think
about it like a bucket of money and
anytime that that bucket of money depend
upon one is tied to whether it's a fixed
rate whether that's a you know an
indexed type rate whatever that is will
grow anytime that you've received gains
when it comes time for that
that's certainly that certain date and
time that you want to retire then you
have certain options to have unlimited
streams of income and it's contractually
guaranteed by the by the terms of the
contract through the through the
insurance company that you choose so
understand that anytime you see a
deferred annuity it's not an immediate
annuity with an immediate annuity
someone places their money in the
immediate annuity understanding that
okay I want to retire exactly in thirty
days and this is the lump sum that I
want to give the insurance company
what's the most amount of income the
insurance company could give me it's
completely different you're you're just
trying to place money within the annuity
realm within some of the very favorable
contractual guarantees out there but
understanding okay it's gonna take some
time for my money to grow and to really
act favorable for me so there's there's
a really there's a couple really cool
types of annuities out there and now as
you see she pulled up on my screen that
I want to show you the difference
between utilizing a deferred annuity or
just a traditional IRA that's involved
with mutual funds so as I said over here
money an account will grow dependent
upon what the account value is tied to
so with the fixed annuity a fixed
annuity it's it's tied to a fixed set of
interest rates it's it's like a Treasury
bond or like a bank CD you have a set
amount a set rate during that and during
that that length of the contracts so if
you have a five year fixed annuity then
and let's say it's paying you two
percent then every year for the next
five years our go to percent is going to
be added into your bucket of money into
that and that initial starting starting
value now somebody might want to go into
a fixed annuity over traditional IRA
with mutual funds is because mutual
funds have a lot of fees involved with
them you have mutual fund related fees
you have advisor fees with an advisor is
managing that account you also have
something known as downward market loss
that could really hinder your retirement
accounts just like in 2008 the average
portfolio lost fifty seven percent so if
you had a traditional IRA versus a fixed
annuity to fix your new 'ti they used to
be these to be very attractive and the
80s the 90s not so much anymore because
why interest rates have hit rock bottom
so just kind of understand fixed annuity
it's just a fixed interest rate there's
nothing sexy nothing attractive about
that but it still gives you more
favorable rates of return than than a
typical Treasury bond that that's
currently paying you know less than 1%
right now now the next the next form of
deferred annuity is variable annuity and
whenever I compare a variable annuity
verse IRA mutual funds I tend to lean
more towards an IRA mutual funds if
you're setting it up you know through
through wealth accumulation specialist I
don't like variable annuities because I
believe that they have a lot of hidden
fees is what I'm just personally seen
with a lot of individuals that I've
called my office I have variable
annuities and you know after after we
find out what the hidden fees are we
would play the game you know let's let's
let's give the company a call and and uh
you know I'm able to ask whole slew of
questions to really open up the clients
mind that understanding variable
annuities it's tied to mutual funds have
an IRA is tied to mutual funds typically
the IRA has less and fees and a higher
potential for you to have gains within
their the variable annuity it's I mean
I'm really because of the fees and you
have the dowered the potential downward
market loss with them that's why I would
recommend that you
within ira mutual funds but you know
that's just speaking in very general
terms obviously it's a case-by-case
situation there are some good variable
annuities out there but just the ones
that I've dealt with on a personal basis
is the reason why I do not like them
then you have the index annuity okay
this is a great deferred annuity they
came out in the early 90s they used to
have very low cap rates what an index
annuity is is it's kind of like a fixed
annuity but rather than paying you a
fixed rate of return year by year the
company will pay you an amount that is
the correlates to upward market
movements so if you have a stock market
index let's say you're tied to an S&P
500 and the S&P 500 gained 10 percent
that one year but your cap rate is let's
say 8% for that given year then you will
be capture will only have seen 8% gain
into your account but if the S&P the
next year loses 20% your you are you
have a floor of 0% so you either going
to be gaining up to the cap or not
gaining anything so you understand your
principal is not at risk with a variable
annuity your principal is at risk so
just kind of understand that so index
annuities used to have very low cap
rates where they weren't that attractive
but then in 2008 there there was a
combination type annuity that involves
the index annuity with a with a sort of
lifetime income that you can never
outlive with with income riders and
that's known as the hybrid annuity
hybrid annuity I that is my favorite
product of them all because your actual
account value if you know that you're 15
years out ten years five years out from
retirement you could essentially take
money roll it over from you know your
IRA your cash accounts 401k you could
roll it over into a hybrid annuity or an
index annuity and have your account
value either gained with upper market
movements flat line whenever the market
does not you know goes down or does not
do anything so your so your principal
your account value staying preserved and
you're only receiving that compound
interest on that account and then when
you're ready to turn on your income
let's say your age 62 and you want to
turn on or turn on age 67 or 65 whatever
that is you have a secondary contractual
guarantee over there known as the income
which gives very very favorable rates of
return could be upwards of you know 7%
compound interest and there there's a
calculation that that is determined with
how you could actually receive lifetime
income without ever losing control of
your money so you know there's there's
some really fascinating things with
these deferred annuities just understand
that you're deferring your money you're
deferring turning on an income for a
later date and time and then there's
some really great contracts out there
you have hundreds of different contracts
per type of annuity so there's hundreds
different contracts for the fixed
annuity hundreds of different contracts
for the hybrid for the index so just you
know kind of understand that you should
not have a one-size-fits-all type
mindset and you need to become educated
and find out what your options are if
you understand what your goals are one
of the things I recommend give our 1-800
number a call we implemented 24/7
customer service where you give us a
call we'll educate you you know we'll
send you some different information if
you're interested in an annuity we have
certain softwares where certain
proprietary relationships where we get
you much higher contractual agreements
than other types of advisors out there
by by just understanding these contracts
understanding how these contracts work
and really knowing how to position you
in a very favorable in a very favorable
way so once again my name is derek
ephah' down this cool-looking cartoon
guy right over there and you know please
give us a call I really hope that you
found some value in this video and be
able to look out for some of my other
videos thanks guys
