Need help understanding annuities.........

Need help understanding annuities.........

Dunny Rummy	7/12/2004 11:42:00 PM
What is an annuity? Is it like a car (once you pay it you cant get your money back)? My mom invested over $165,000.00 for a guaranteed monthly payment of over $800.00 for life. I am totally ignorant about annuities but I wish to see my mother isn't being taking advantaged of. When I ask my mom what a annuity is she knew little about what she did. Therefore I just want to make sure the people she made the deal with her didn't swindle her. Scam artist prey on senior citizens like my mom these days so I just want to protect my mother the best I can but I need the knowledge of annuities. Please post some web sites that can, in layman's terms, the fundamentals of annuities and what the law says about annuities too. TIA!



"McGyver"	7/13/2004 6:49:06 AM
"Dunny Rummy" <fdsss@dfdsf.com> wrote in message news:et76f0lms7acd1moc3t1fs06ajleuk9ssn@4ax.com... What is an annuity? Is it like a car (once you pay it you cant get your money back)? My mom invested over $165,000.00 for a guaranteed monthly payment of over $800.00 for life. I am totally ignorant about annuities but I wish to see my mother isn't being taking advantaged of. When I ask my mom what a annuity is she knew little about what she did. Therefore I just want to make sure the people she made the deal with her didn't swindle her. Scam artist prey on senior citizens like my mom these days so I just want to protect my mother the best I can but I need the knowledge of annuities. Please post some web sites that can, in layman's terms, the fundamentals of annuities and what the law says about annuities too. The following site will get you started. http://www.immediateannuities.com McGyver



"Jim Kennedy"	7/31/2004 2:50:01 PM
"Dunny Rummy" <fdsss@dfdsf.com> wrote in message news:et76f0lms7acd1moc3t1fs06ajleuk9ssn@4ax.com... What is an annuity? Is it like a car (once you pay it you cant get your money back)? My mom invested over $165,000.00 for a guaranteed monthly payment of over $800.00 for life. I am totally ignorant about annuities but I wish to see my mother isn't being taking advantaged of. When I ask my mom what a annuity is she knew little about what she did. Therefore I just want to make sure the people she made the deal with her didn't swindle her. Scam artist prey on senior citizens like my mom these days so I just want to protect my mother the best I can but I need the knowledge of annuities. Please post some web sites that can, in layman's terms, the fundamentals of annuities and what the law says about annuities too. TIA! I can't tell you what the legal document says, you would have to read the policy. I can give you an idea of terms to help you read what she bought. An annuity is usually sold by an insurance company. Basically, you pay in an amount of money and you get a guaranteed payment every month for a specified period of time. There are two basic types of annuities - Fixed and Variable. I am going to assume she bought a fixed annuity. A variable annuity is much more complex, you don't see many of them, the agent has to be licensed with the NASD and my bet is she wasn't sold a variable annuity. Even if she was the basic terms I am going to define will be the same, just how the payments get determined will vary. (basically a variable annuity is based on an investment fund and payments can vary based on that.) Immediate Annuity - means she would start receiving annuity payments in 30 days based on the terms of the contract. Deferred Annuity - means she would start receiving annuity payments at some future date. She notifies the insurance company when she would like to receive payments. There are some tax benefits (check with tax advisor) as the money grows tax deferred.(the money does earn interest. That interest rate is going to vary over time, but will never be less than what is garmented in the policy.) (doesn't have to be in an IRA). When she starts receiving payments part of each payment is considered return of principal and not taxable. (assuming the original money was after tax money and not qualified money from an IRA. If it was qualified money then the whole payment is considered taxable income.) If the annuity is a deferred annuity she can cash out, BUT often there is a read end load that declines over time. You may not want to cash out immediately since she might lose like 7% of the funds as a back end load. When she goes to get the payout portion of the annuity then she has several options. (see policy for details) 1. Cash. She can take the accumulated value. She would have to pay taxes on the gain immediately. 2. Single Life Annuity. She would get a guaranteed monthly payment for as long as she lives. (part of each payment would be taxable, because part is return of principal) This payment could be as short as 1 month or as long as many decades. It depends on how long she lives. The insurance company is taking the risk that she will out live the lump sum. Her risk is that she will die before she receives much. Of the monthly payment options this will return the highest monthly payment. Some people don't like this option because the insurance company could pay as little as 1 payment if the annuitant dies immediately. If you were not healthy this isn't the options you want. 3. Single Life Annuity with period Certain. Here she would receive a monthly payment and if she died before the period certain ended the payments would continue to her estate or beneficiary as she specified. If she lives past the period certain she continues to get payments. Period Certains are usually 5, 10 15 20 years. Here is an example: On 1/1/2005 Joe chooses a Single Life Annuity with a 10 years certain. Shifting Sands Mutual must pay Joe (or his beneficiary) a MINIMUM of 120 payments. If Joe lives beyond the 120 payments they must still pay him until Joe dies. If he dies 3 months down the road then they must keep paying his estate or designated beneficiary (Joe's choice made before he dies) until they have made 120 payments (12 months X 10 years = 120 payments) to the designated beneficiary. In general, the longer the period certain the lower the monthly payment because the insurance company has to guarantee the payments for at least X number of years. (In our example 10 years) A lot of people choose this one, it appeals to them. 4. Single Life Annuity with refund certain. This one is a little hard to calculate, but basically it says that the insurance company will keep making payments for the longer of the annuitant's life or until the payments total the amount used to buy the immediate annuity. For example, if you paid $200,000 for this annuity and the insurance company paid $1,000 per month then they would pay that for AT LEAST 200 months. (200,000 / 1000 = 200) If you live longer than 200 months then you keep receiving $1,000 per month. I've totally made up those numbers, they have no basis in reality of what the insurance company would pay. 5. Joint Life Annuity with 50% Survivorship. An annuity payout can be based on two lives. In this example, the insurance company would make monthly payments until one of the annuitants died. Once one of them dies - doesn't matter which one - then the payment gets reduced to 50% of the original amount. Once the 2nd person dies the payments stop. Just like a single life annuity but based on two lives. Since it is more likely that two people will live longer than one you get a lower monthly payout that a single life annuity. (assuming everything else is =) The payout is based on the ages of the people. The older they are the higher the payout. The percentage survivorship does not have to be 50%, other options that are quite common are 100% (no reduction on death of first person), 75%, and 66%. the higher the percentage survivorship the lower the monthly payment. 6. Joint Life Annuity with X% Survivorship Y period certain. Same as the single life one but based on 2 lives. It means the insurance company will make payments for at least Y years. If both annuitants die before the period certain ends then the company will continue to make payments to the beneficiary until the period certain ends. 7. Joint Life Annuity with X% Survivorship with refund certain. I think you should be able to figure this one out by now. Annuities are good for those that are healthy, want a guaranteed check each month, and want someone else to assume the investment risks and money management. Hope that helps. Can't tell if it is for her or not, but at least

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