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| © 2001, 2002 Strictly Business Magazine All Rights Reserved. A division of S&S Enterprises, a Floyd Snyder Production. Santa Maria, California, 93454 Feedback. |
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| Senior Finances Specializing in Investment Management and Asset Preservation For Mature Investors Published by: |
| Trent J. Benedetti, C.P.A., C.F.P. |
| Benedetti & Associates Certified Public Accountant,Inc. 2151 S. College Drive, Suite 101 P.O.Box 5958 Santa Maria Ca. 93456 Tele: (805) 922-4881 Fax: (805) 922-7953 Email Mr. Benedetti |
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| Insurance Companies Add Attractive New Features for Variable Annuity Investors With investors now fully understanding that markets go down as well us up, a few insurance companies have added a guarantee feature to their variable annuities. The guarantee ensures a minimum level of income regardless of the performance in your investment sub-accounts. Here’s a hypothetical example. One insurance company, for example, guarantees that when you hold the annuity to term (ten years), they will credit a minimum interest of 6%, even if your sub-account went down in value. So your $100,000 investment is worth $179,000, minimum. Of course, it could be worth more if your sub-accounts appreciated by more than 6% annually. If you have funds now earning a low rate that you do not plan on using for ten years, this can be a very appropriate investment because of the guaranteed income of at least 6%. And you don’t need to wait ten years to get income; you can start taking income one year after you start your annuity. Another new feature is “the annuity that pays its own tax.” Many investors enjoy the tax deferral of annuities, but if part or all of the annuity is left to beneficiaries, there can be a big tax bill. So a new feature in some annuities pays an additional amount at death to cover these taxes-- from 28% to 40% on top of the accumulated annuity value. If you have an annuity without these features, you can exchange it for an annuity that does. Or, if you like the idea of guarantees, these new annuity features may be for you. Please check off on the coupon for a brochure matching your interest. --------------------------------------------------------------------------------------- Don’t Be Tempted By High CD Rates Without Reading the Fine Print Many banks find it less expensive to sell their CDs through securities firms than to have branches in each town. These brokered CDs are often callable CDs with long terms. Although FDIC-insured, they have features you must understand. Before you jump at the rate offered by some ad in the Sunday newspaper, here’s what you need to know about the features offered: High Rate: The high rate could be temporary. Most callable CDs are callable after a year or two, which means you can get paid back and your high rate evaporates. But if rates rise, you could be locked into a 15- or 20-year CD that does not look good if new rates are higher. Callable: The bank can pay you back your principal after the first or second year, but is under no obligation to pay you back until maturity. Do not rely on some representative’s estimate of when you will be paid back because the only assured payoff is at maturity. Liquid: Yes, many banks will offer to resell the CD if you want to get out before the end of the term, but you could be forced to take a big discount for the liquidity. Put at Death: You may be told that if you pass away before the CD matures, your heirs can “put” the CD back into the bank and get the principal. This offer, however, is dependent upon the bank having enough funds in the “put” pool, and your heirs could wait to see cash. As long as you understand what you are getting, these can be a very good deal. For example, a woman purchased a 15-year callable CD four years ago, paying 7.25%. She received a comfortable monthly income (with the security of FDIC insurance on the principal) until just recently, when the bank called here CD and paid back her initial deposit. She was happy with the outcome. |
| Two articles this page: Insurance Companies Add Attractive New Features for Variable Annuity Investors Don’t Be Tempted By High CD Rates Without Reading the Fine Print |
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