Calculating the Value of a Longevity Annuity
A longevity annuity is arguably the most efficient way to...
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Annuity
An annuity comes in many forms, but a simple definition is that an annuity is a contract that converts a sum of money into a series of periodic payments for an agreed upon period of time. An annuity can be thought of as a financial vehicle that converts a pool of money into a stream of income. Annuities are most useful in addressing the financial planning needs of people in or approaching retirement. Annuities are unique in the financial world because they can provide protection against the risk or outliving one’s assets (longevity risk) by guaranteeing income payments in perpetuity or any other selected amount of time. Annuities can be viewed as a type of personal pension plan. Social Security is similar to an annuity in that money contributed over the course of one’s working years is converted into a series of periodic payments that provide income during retirement.
Annuity Income is Tax Free Starting in 2010 When Used to Pay for Long Term Care
Starting on January 1 2010, proceeds from annuities will be free from federal income taxes when used to pay for long term care . The Pension Protection Act of 2006 provides the basis for this change in the tax law. So called "long term care annuities" provide an alternative to the purchase of a long term care insurance policy. There are pros and cons to both approaches, and consumers may wish to pursue both options as they potentially complement one another. A positive for the annuity involves...
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The Costs of Investing and How the Fund Management Industry Comes Out on Top
A common refrain among the financial media and the asset accumulation community is that annuities represent a poor option because of the high fees and expenses—much of which is presumably directed towards compensation of intermediaries—that are incurred by the customer.
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What to Think When a Financial Advisor Says: "You Know I'm Not a Big Fan of Annuities"
Disdain for annuities is a thread of conventional wisdom that seems to exist among a broad swath of financial advisors.
In fact, many financial advisors seem conditioned to wear annuity criticism as a sort of badge of honor. The inherent logic roughly resembles the following: I am an objective, knowledgeable advisor--not a commissioned salesperson--and therefore shun most forms of insurance and...
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TIAA-CREF CEO on Annuities as the Backbone of a 21st Century Retirement System
In a recent interview, TIAA-CREF CEO Roger Ferguson discusses post financial crisis retirement planning and CREF's role in the new retirement planning landscape. Ferguson believes that increasing longevity in the U.S. is a key driver of what will be a very different 21st century retirement system. Ferguson also suggests that stable sources of lifetime guaranteed income --in other words an annuity--should provide the "backbone" of the future system: It's really important to use this to educate...
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