Annuities Can Be a Useful Estate Planning Tool
Sep 8, 2015
Virginia Beach, VA (Law Firm Newswire) September 8, 2015 – Annuities are regular payments that insurance companies provide in return for contributions, typically to a life insurance policy. For some, annuities represent a valuable estate planning tool, providing a way for retired people to ensure a regular income even if they live a long life.
“Annuities can be helpful in estate planning, but it is important to understand the differences between the types of annuities, as well as their limitations,” said Andrew H. Hook, a Virginia estate planning attorney with Hook Law Center, with offices in Virginia Beach and northern Suffolk. “They should typically be considered for people who have maxed out their IRA and 401(k)s but are still looking to save aggressively for retirement.”
Single-premium immediate annuities are the most basic type of annuity, in which the insurance company pays a set sum of money for a given period of time. Other types of annuities include variable annuities, in which payouts are based on investment funds’ performance, and indexed annuities, in which payments are tied to a stock index. Some variable annuities allow owners to purchase a rider that guarantees a minimum annual payout.
Variable and indexed annuities now represent the majority of annuities sold, at about 80 percent of all annuities. These types of annuities can be useful, but they also tend to be complex and can be risky. For example, if the value of the investments tied to the annuity decreases, the annuity’s cash value can decline as well, meaning that a minimum payout rider does not truly protect against loss. Indexed annuities can be particularly troublesome, as they provide no guaranteed income.
One of the biggest advantages of annuities is that the assets accumulate tax-deferred, as in a traditional retirement account. Although annuity contributions are not tax-deductible, there is no limit to the contributions a person can make. For individuals who have already made their maximum contributions to their 401(k) and IRA, an annuity may be a strong choice.
Learn more at http://www.hooklawcenter.com/
Hook Law Center
295 Bendix Road, Suite 170
Virginia Beach, Virginia 23452-1294
5806 Harbour View Blvd.
Suffolk VA 23435
- Strategies to make sure your retirement savings last
Americans are living longer than ever before, and for many people, Social Security retirement benefits represent only part of the income they wish to have in retirement. The average American life expectancy is about 79 years, and millions will live to be much older. The average life expectancy for a person who reaches age 65 […]
- How divorce affects retirement planning
Older people are getting divorced more frequently than ever before. Divorce can be a significant roadblock for retirement planning and financial security. Although divorcing earlier in life can have a minimal impact on retirement, divorcing after the age of 50 can have huge implications. Couples who are getting divorced should collect information about all of […]
- Choosing between Original Medicare and Medicare Advantage
Deciding what type of health insurance to get can be a daunting task for seniors. Medicare is highly regarded and very popular, but Medicare Advantage differs in ways that could be advantageous to some. Original Medicare includes Medicare Part A (hospital expenses) and Part B (other health care such as doctor’s office visits). The monthly […]
- How to appeal a Medicare denial
If you were denied coverage or payment by Medicare, you have the option of filing an appeal. The denial must be from Medicare, your Medicare Prescription Drug Plan or your Medicare health plan. It is within your right to file an appeal if you were denied any of the following: A health care service, prescription […]
- Defining common terms in Virginia estate planning
Estate planning is a complex process, and typically involves learning some new terms and concepts. Some of the most important estate planning terms to understand include: Advance medical directive – A document that details a person’s health care wishes in case they become incapacitated. An advance medical directive also allows the individual to name someone […]