Annuities
Annuity questions, answered
These are the questions I hear most on first calls. If yours isn't here, ask me.
Can I lose money in an annuity?
Not from the market, with the fixed and fixed index annuities I offer. A down year in the index credits zero and doesn't reduce your balance. You can lose money in other ways: by withdrawing more than the free amount during the surrender period, through optional rider fees in years with little or no interest credited, or if the insurer fails. That's why I only work with financially strong insurers.
What happens if the insurance company fails?
Insurers are regulated by each state and must hold reserves to back their contracts. If one does fail, your state's insurance guaranty association protects annuity owners up to a limit, often $250,000 in annuity benefits per person per insurer. Limits vary by state. Spreading larger amounts across more than one insurer keeps you within the limits.
How do I get money out?
Most contracts allow free withdrawals of about 10% a year, plus required minimum distributions if the annuity is in an IRA. Many waive surrender charges for a nursing home stay or a terminal illness. After the surrender period ends, all of your money is available.
What fees do annuities charge?
Fixed and fixed index annuities usually have no annual management fee. The insurer's cost is built into the rate or cap. Optional riders, such as lifetime income, usually charge an annual fee. Surrender charges apply only to withdrawals above the free amount during the surrender period.
How are annuities taxed?
Growth is tax-deferred. Outside an IRA, withdrawals are treated as coming from earnings first, which are taxed as ordinary income; your original deposit comes back tax-free. Inside an IRA, withdrawals are fully taxable, like any IRA. Withdrawals before 59½ may face a 10% IRS penalty on the taxable part.
Is an annuity better than a CD?
It depends on the money's job. A CD is FDIC insured and better for short-term savings. A fixed-rate annuity often offers longer terms, and the interest isn't taxed until you withdraw it. The MYGA and CD comparison lays out the differences.
What happens to my annuity when I die?
Your beneficiaries receive the death benefit, which for most fixed and fixed index annuities is at least the account value, and it passes to them directly without going through probate. A spouse can often continue the contract as the new owner.
How are you paid?
The insurance company pays me a commission when you buy an annuity. You don't pay me a fee, and on the fixed and fixed index annuities I offer, the commission isn't deducted from your deposit.
Do we need to meet in person?
No. I work with clients by phone and video, and most applications can be signed electronically.
Which states do you work in?
I'm licensed in 20 states and adding more as needed. See the full list.