Pros and Cons of Immediate Annuities

Hey, welcome to this segment on the pros and cons of Immediate Annuities. When we’re in our office and we use the word annuity, it usually triggers a lot of reactions. And we’re always curious to see what people are carrying in regards to their understanding of Annuities. And so I have a quick little analogy. It’s a little fun that I’d like to give you here with some manipulatives. I’m a very hands on, physical learner so I’m going to try and do a quick little experiment and then make an analogy. So my favorite color is blue. Cool, you’re sitting there thinking of different shades of blue. If you’re inquisitive, you might say okay, well what shade of blue specifically? And why is that your favorite? Well I think one of the shades of blue, my favorite would be that deep blue that you can only see in a Caribbean ocean while you’re on a cruise. There’s a shade of blue that is just absolutely full of incredible family memories. And you never forget it. There’s a blue that Hopkins Vikings wear. You know where I graduated High School from. That’s a blue that you just never forget, that shade. There’s a blue of Torch Lake if you’ve ever had the ability to fly over Torch Lake. I didn’t know that Michigan could offer those kinds of shades of blue from that lake. That’s a view that you will never forget. So what’s my analogy? Well if you’re not careful you’ll hear the word Annuity and you’ll say oh Annuities, blue. But that’s not necessarily true. You know there’s a lot of different shades of blue that you have. And that’s very true with Annuities. There’s so many different types of Annuities and features of those Annuities. You have to be careful to just lump them all up as the same shade. Today we’re going to talk about maybe this one. So this is an Immediate Annuity, okay that you might do a single premium Immediate Annuity and we can talk about those features might look like. Why would you want that, okay? Well this Immediate Annuity is a contract between you and an insurance company to pay a lifetime income stream. And so what happens is you basically would give them money, let’s say $100K and then they would give you a contract to say we’re going to let that become an income stream for you for the rest of your life. That usually starts within a month all the way up to within a year, those payments start. They’re basically going to contractually give you, you know these payments back as income stream for a set amount of time. Sometimes the payback period might be five, six, eight years. Many times it’s for life. Sometimes the options on the payback might be for a single life, just on you or maybe there’s a spouse that you want to cover and you can do a joint life payout. Basically what happens is the insurance company is saying if you live a really long time, we’re going to pay you for the duration of that lifetime. What are some of those benefits? Sometimes people will say you know I want to will say you know I want to bridge my predictable income stream from age 62 to 70 just so I can defer my Social Security until I turn 70. And then I want to switch and have the Annuity be done and have the Social Security payments start. And then my predictable, contractual income is something I can calculate easily. So that would be a benefit. Sometimes clients want to make sure their spouse is taken care of and so they’ll do a joint payout. Where if they were to pass away, their spouse still has that continual income. You can built these to where they have cost of living adjustments on them. To where those payments actually adjust up. You can build them to where there’s a death benefit. There might be Annuities out there that don’t have any death benefit. And you know you have to be very careful of that because that would enter in to some of the cons of these things where sometimes these insurance products, if you pass away and your entire premium goes back to the insurance company. And there is no beneficiary money to pass on from an inheritance standpoint. There’s fees that you have to be careful of. Some have fees, some do not. So you want to really be careful of those fees. You want to look at what kind of surrender charges there might be if you wanted all of that money back. Okay, what is that going to cost you. So if you’re there wondering you know I might be in the ballpark for looking into an Annuity, please give us a call. We work with these all of the time. We think there’s some beautiful shades of blue and there’s some terrible shades of blue, using that analogy. Hey I hope that information was valuable. If you have any questions about Annuities, please feel free to give us a call. You can always check us out on https://url.us.m.mimecastprotect.com/s/KJ6qCn5m9rFgnV9BTo2WhV?domain=youtube.com. And you can always give us a call at the number on your screen.