Taking Steps To Sell A Structured Settlement Payment And Then Accomplishing A Sale

By Henry Jeon

Considerations involving the need to sell a structured settlement payment are many and varied. These payments are usually the result of a settlement has been reached in a personal injury or tort lawsuit and will include such features as a payment of settlement money over a defined period of time. These sorts of settlements have grown in popularity over the last several decades.

Commonly, a structured settlement is used instead of a lump-sum payment which -- before the 1970s -- was the preferred method of paying upon settlement of a lawsuit involving personal injury or some other tort. In most structured settlements, pre-determined amounts of money are paid off over a certain length of time and in installments. Many beneficiaries of such settlements live quite nicely off them.

However, there may come a time when a recipient of a settlement needs to obtain fast or quick money in order to meet other financial obligations as a result of an emergency or some other issue. The law in most states allows for recipients of such settlements to sell off portions of their settlements in many cases in order to obtain up front money to meet emergency needs.

Think of the sale of such a payment to be like having a bird in the hand rather than waiting to try to capture two birds in the bush. Ready cash can be obtained up front rather than having to sit back and wait for money that is going to be paid out on an annual or some other sort of basis. Additionally, federal law generally doesn't require the payment of any tax on such a sale.

The fact that a structured settlement payment isn't subject to federal tax can go a long way towards making such a sale attractive, with many of these transactions taking place because of that fact. Such sales can range from several thousand dollars up past a million or more dollars. All such settlement prices depend on the structured payment and how much of it is going to be sold off.

When considering selling such a payment, the first thing to do is to check out the financial institutions or funding sources offering to buy such payments. Make sure that any funding source that is entering into negotiations for the sale of the payment is 100% reputable, is insured and also carries a bond guaranteeing that it can meet its financial obligations. These are minimum requirements.

Also, keep in mind that any such sale will tend to be at a negotiated discount rate between the recipient of the structured settlement payment and the funding source making the purchase of the payment. What this means is to be prepared to negotiate for as favorable a payment as can be obtained. Additionally, many states require the settlement recipient to obtain approval from a judge before the deal can be closed.

Certainly, there are occasions when it can sometimes make sense to sell a structured settlement payment, so take care to find a good funding source, first of all. Check the quote over carefully and decide if the amount offered will be sufficient. Once all steps between the two parties have been completed, it usually takes around 90 days before final payment can be made, so keep that in mind. - 31884

About the Author:

Why an individual might sell a structured settlement payment and how it's done can be of utmost importance when someone who has been the receiver of a sell structured settlement payments award or decision is in need of quick money or ready money.

Ask Yourself These Questions Before Choosing Annuity Insurance

By Christopher Paul

Looking for an annuity is like buying a house. You need to keep what you need in mind as you shop. Just like houses, there are many different styles of annuities and some of them fit your needs better than others do. While you might find very attractive returns, if the product isn't a good fit, it's not the best annuity for your situation.

How do you decide which one is best? You start by listing the things you find important. Don't worry about spelling or making it fancy, it's only for your eyes. It's a shopping checklist to help keep you focused on your investment needs.

When do you need the funds? If you need the money for a large purchase within a year or two, an annuity may not be the best product for your situation. Most annuities are long-term investment, although some offer a surrender period of a year or less. Just like a short-term CD, you get a slightly lower interest rate. If, however, it fits your needs, then it's the right annuity for you.

You need to ask yourself whether you want an income from the money or just want to let it sit and grow tax-deferred. If you want an income, do you need one that you'll never outlive?

For those that want an immediate annuity, an income they can't outlive, the amount of payment is the most important feature. If, however, you want a place to tax defer funds and prevent taxation of Social Security, you'll look more at the immediate interest rates.

People often need products that allow for either joint ownership or annuitization. This is particularly true of couples that depend on each other's income for survival. Check to see if the company you like offers that option before you proceed.

Are you using the annuity as part of Medicaid planning? Ask for a copy of the wording of the annuity contract and take it to your attorney helping you with the planning. In an effort to make the annuity more attractive to annuitize, some contracts allow some invasion rights. While this is good for most people, those that want the bulk of the funds turned into a liquid cash stream need to know that this does not pass Medicare guidelines.

You need to know the length of the surrender period before you purchase an annuity. No matter what your original intentions, you may find that at some point, you have to have some of the money. Often policies that offer the highest rate of return often have the longest surrender period. This becomes important information if you find you have an emergency that requires a withdrawal.

Find out if the annuity you choose allows additional deposits. As people find how easy their annuity is to manage, they often combine other investments into the annuity. If the company allows subsequent investments, it keeps their financial program simpler and limits the number of products to a few.

Know what you need and what each contract offers before you make your final decision. By narrowing the field to your requirements, you'll make the decision of an annuity purchase much easier. - 31884

About the Author:

Christopher Paul writes content for best annuity - a growing site committed to providing people with unbiased information and advice for their retirement. We provide constantly updated information on market conditions, the benefits, and the myths agents will tell you when looking for annuity insurance.

Types of annuity insurance options and finding one that fits your needs.

By Roger Mckenzie

Investors have a number of different options available to them when it comes to annuities; each with different interest rates, costs and other advantages and disadvantages. Keep reading to find out more about annuity options which you may be interested in.

Immediate Annuity: Just as the name suggests, the investor starts receiving their payout from an immediate annuity right away. The payout might continue for the life of the investor or for a specified period of time as set in the annuity contract's terms. If you withdraw money from your annuity prematurely (in the US, this is before you're 59 years and six months of age) there are tax penalties, which makes the immediate annuity an option which is largely limited to persons who are of this age or older.

Alternatively, you can receive a deferred annuity insurance in which the payouts are deferred until some specific time or date in the future. Here the principal sum is invested and is let to grow in to a tax deferred income over some time. These are an extremely common type of annuity insurance and are most preferred by people who need a tax deferred investment opportunity in order to save up for their retirement days as with a retirement annuity or even an index annuity. Of course, if you're younger than 60, this is your only option. The terms "immediate" and "deferred" only related to an annuities payment schedule. Both options are open to investors regardless of whether they choose a variable, fixed, or indexed annuity.

Fixed annuities are the most popular of any type of annuity, even more so than variable annuities. These investment provide an interest rate which is locked in, making it a safe investment. Fixed annuities are particularly popular when the stock markets are in a decline, since there are fixed annuities with interest rates as high as 8%; very good compared to bonds and CDs.

Variable annuities are the second most popular type of annuity. These investments allow investors to put their principal into the stock market or other investments. There is a higher degree of risk associated with variable annuities, though a well informed investor can exercise some influence on exactly how much risk they're exposed to.

When attempting to purchase the best annuity option, consider consulting with a professional. - 31884

About the Author:

When it comes to annuities make sure you explore all your annuity quotes online visit http://www.variableannuityquote.com for Research and annuity quotes.

Making the Right Decision On Fixed Annuities: What to Consider When Purchasing A Fixed Annuity

By Christopher Tyler

People that want the most for their investment dollars but also want a safe guaranteed investment are looking towards fixed annuities more often these days. There are a great many reasons to choose a fixed annuity over a CD. Often the rates are higher and the annuity gets tax-sheltered growth. Not all annuities are alike. When you select an annuity, shop just like you would for any other purchase. You want to buy the best annuity on the market.

Some of the items to look for in a fixed annuity are not as transparent as the interest rate. While the interest rate is a place to start, you need to look at certain specifications in the policy.

Each policy has an initial rate guarantee period. The initial rate is often quite attractive but if it doesn't have a longer lock-in period, you might be stuck with a product paying low rates. Some companies have an extended initial rate guarantee but offer a first year bonus to make the product more attractive. After the initial year, the rate applied to the subsequent years is often much lower.

Each product has a minimum guaranteed rate of return also. This is the rate that no matter what the economic conditions, the company promises is the lowest you'll ever receive. When interest rates at the bank drop below a percent, the minimum guaranteed rate becomes important.

On occasion, minimum investments become important. If you plan to remove money periodically until you deplete your policy, you'll want to avoid a fixed annuity with a penalty if the funds fall below a specific amount. If you're a smaller investor, you won't even be able to start a fixed annuity if your funds don't meet the company minimum.

Pay attention not just to the initial investment but also the amount of subsequent investments if you plan to ad a little at a time. Even if you don't think you'll add more funds, you'll probably be surprised when you realize that not only is an annuity tax-deferred, it makes your organization easier if you want to simplify your finances and narrow it down to only a couple of investments. You also name the person that you want to receive your funds if you pass away.

Surrender charges, like early withdrawal penalties are important when you invest your money. Some companies surrender period is shorter than others are. You might find an annuity that allows you to invest for one year and then remove the funds without penalty. Other products may have charges that last not just your lifetime unless you take annuity payments.

Occasionally, you'll find annuitize that don't allow your beneficiaries to receive the funds in a lump sum but also require they annuities the proceeds. If the heirs want a lump sum payment, they pay a high penalty regardless of how long you had the product before you passed. If this fits your plans for the way you want your money received by heirs, it's a huge benefit. Others, however, find the restrictions too limiting.

Even if you never plan to remove money from your annuity, it's comforting to know you have access before the end of the surrender period. The amount of penalty free withdrawal varies from company to company with some companies offering interest only and others allowing you to take as much as 10 percent per year cumulative if you don't take it in one year. Most companies offer withdrawal right somewhere between the two extremes.

Be as careful when shopping for an annuity as you are for any other major purchase. Most people don't buy the first car they see, they get competitive offers, look over all the features and then choose. Do the same thing when you buy an annuity and you'll buy the best annuity for your situation. - 31884

About the Author:

Christopher Tyler educates on the topic of fixed annuities and other investment options for retirement. As the economy has fallen into the worst recession in decades more and more investors are looking for safe options to grow their investment for retirement. Come see to learn more about the fixed annuity as a viable investment for retirement.

Getting Started With Variable Annuities

By Nita Landaverde

If you're considering a variable annuity, this article will provide you with the information you need to gain an understanding of these investments and hopefully, help you to make a good decision about these investments.

As with any annuity insurance, a variable annuity is a contractual agreement between an investor and an insurance company. The investor provides an upfront payment - either one time, or instalments.

The investor then receives payments consisting of a portion of the principal as well as the interest earned by said principal on an ongoing basis. These payments may continue for life or for a set period of time as stipulated by the contract.

With a variable annuity, you decide how to invest the money that you have placed with the insurance company. There will be a list of pre selected funds ranging from highly aggressive stocks to conservative bonds and you choose how you wish to invest.

A variable annuity provides you with similar flexibility of having your money outside of the annuity, but with the tax deferral advantages of an annuity

Variable annuities generally also include an option to convert the annuity to a fixed annuity. During the life of the annuity, the investor may choose to keep their payments invested in stocks and bonds, with the value of their investment fluctuating with the markets. Alternately, the investor can opt for a fixed interest rate if they would prefer to avoid the risks of the stock market.

You can also allocate a section of your payout to any fixed account that will render you a fixed interest rate. So even if you keep shifting your investment you need not be paying any tax on the income gains until you receive payment. In the payment phase, you could be getting your payments and gains as a lump sum or if you wish so, you could stagger it as a range of regular payments.

Generally speaking, investors do very well with a variable annuity invested in the major US markets. Though there is always some risk involved with investing, most economists and financial experts regard stocks as a solid investment which provides flexibility and tax deferrals.

Before deciding on a variable annuity, investors do need to keep in mind that there are costs associated with these annuities which can be upwards of 3%. You'll want to make sure that you understand both the costs and benefits before choosing variable annuities as a way to invest. - 31884

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Read about annuity options and other types of annuities visit http://www.variableannuityquote.com

Reasons To Sell A Structured Settlement Payment And How It's Done

By Henry Jeon

Considerations involving the need to sell a structured settlement payment are many and varied. These payments are usually the result of a settlement has been reached in a personal injury or tort lawsuit and will include such features as a payment of settlement money over a defined period of time. These sorts of settlements have grown in popularity over the last several decades.

Commonly, a structured settlement is used instead of a lump-sum payment which -- before the'70s -- was the preferred method of paying upon settlement of a lawsuit involving personal injury or some other tort. In most structured settlements, pre-determined amounts of money are paid off over a certain length of time and in installments. Many beneficiaries of such settlements live quite nicely off them.

When it comes to the selling of structured settlement payments, people who do so usually attempt to sell a certain part of their settlement in order to meet certain emergency or near-term needs. Fortunately, there are many financial services companies that are expert in helping people sell a portion of their settlement in order to obtain needed money.

Think of the sale of such a payment to be like having a bird in the hand rather than waiting to try to capture two birds in the bush. Ready cash can be obtained up front rather than having to sit back and wait for money that is going to be paid out on an annual or some other sort of basis. Additionally, federal law generally doesn't require the payment of any tax on such a sale.

This last feature (no tax) can make putting together a deal to sell such a payment quite attractive, and many such transactions range in price from a few thousand dollars to millions of dollars. Prices depend on the amount of the structured settlement and how much of the settlement the recipient of that settlement would like to sell up front. There are a number of steps that must be taken first of all, though.

When considering selling such a payment, the first thing to do is to check out the financial institutions or funding sources offering to buy such payments. Make sure that any funding source that is entering into negotiations for the sale of the payment is 100% reputable, is insured and also carries a bond guaranteeing that it can meet its financial obligations. These are minimum requirements.

Keep in mind, also, that the sale of a structured settlement is usually at a discounted rate that is negotiated between the holder of the settlement and the institution buying the settlement. Discount rates vary by negotiation, so be prepared for a little bit of give and take. In some states, the holder of the structured payment must meet with a judge who must sign off on any deal reached.

There are certainly plenty of occasions when the need to sell structured settlement payment may arise. Some people require immediate cash or others are weary of waiting for an annuity payment. Regardless, check the financial institution or funding source out thoroughly before agreeing to any sale. And expect about 90 days lag time between sale closure and payment. - 31884

About the Author:

Why one might sell a structured settlement payment and how it's done can be important when someone who has been the receiver of a sell structured settlement payments award or decision is in need of fast cash or ready money.

Getting Ready to Sell Your Annuity Payments

By Wayne McCornwell

Pensions are sometimes something that someone is given when they win a settlement from an insurance firm or sometimes when they win a giant sum of money as a prize. But not everybody wants their money come to them in pieces. So that's when they decide to sell their annuities.

There is one gigantic advantage of selling annuity payments.

One pile Sum

The largest advantage of selling pension payments is the fact hat you get your money all in one lump sum instead of waiting on payments. You don't' have to wait for your money to come and you get it right right there when you're selling your allowance payments.

When folk are finished selling their annuity payments, they often wonder what they are intending to do with all the cash that they didn't' expect to have till later. Here are some of the best things that people can do after selling pension payments.


Pay off a Debt

Depending on the amount that they get when they are finished selling their annuity payments, they may decide to pay off a large debt that they have,eg a mortgage or a vehicle loan. This is a technique to make the money work for you, because you don't have to stress about that debt any longer

College

Another thing that people do after selling annuity payments is they choose to put it away for their children's varsity education. Since varsity is a bit expense, this is something they like getting looked after and not being made to worry about paying in the future.

Travel

A third item that people may decide to use the money one after selling pension payments is they decide to take the trip of an entire life to someplace they have always needed to go. It could be a cruise around the planet or simply to Hawaii, but they decide that they need to do something fun with the money.

Retirement

The last thing that some people decide to do with the money they have got from selling allowance payments is they decide to retire or they put the cash away for their retirement. They need to know that they're going to be taken care of in their old age and knowing the money is there will put their minds at ease.

When you have an annuity, can do is to sell your pension payments and get the money in one lump sum. That way you've got the money to do with it what you please and help you at the moment rather than having to wait for years to get the money that is coming to you. When you sell your annuity payments, there are endless possibilities as to what you can do with the cash that you are given. The items which are listed above are some examples of what folk do with the cash that they're given. What will you do with the money if you take it all in one pile sum? - 31884

About the Author:

Go to Sell Annuity Payments to get free information on this product. This website will give you all of the information you need on Sell Annuity Payments along with a lot of other free information. Don't miss out on this new website if you are looking for Sell Annuity Payments.

Things To Evaluate Before Deciding on Investing in an Annuity

By Ryan N. Matthew

Most people that want a secure fixed investment look toward a CD as their ideal product. Often they don't realize there are other options just as safe but often with more benefits than the CD provides. One of these products is a fixed annuity. There are several advantages over the traditional CD. One of which, is the tax-deferred growth of the annuity. Of course, if you're young, this advantage can become quite a financial stumbling block.

The reason that the tax-benefit in the annuity isn't suitable in many cases is the same reason that young people shouldn't put every cent they have in retirement accounts. Just like other retirement accounts that receive special tax treatment, annuities have a ten percent penalty on the growth if the owner removes the funds before they reach 59 .

For those close to 59 or older, the tax-deferred growth is a wonderful opportunity. During your working years, while your income and tax base is higher, you can tuck your money away and get tax-deferred interest. Once you retire and your income drops along with your tax-base, simply remove the interest and pay lower taxes on your return.

There is a federal taxation law for fixed annuities called LIFO. That is the short way of saying last in, first out. It means that the interest is the first thing you remove from the annuity, so if you have a substantial amount of interest in the product, you may end up paying just as much. You can avoid that problem, however, by stretching your payments over several years or taking annuity payments, which receive different tax-treatment.

Depending on the financial advisor you select, you'll hear mixed messages on the use of a fixed annuity to fund an IRA or 401K rollover. The reason is the duplication of tax-deferral. While the purchase of an annuity because of it's tax-deferred basis alone would make a foolish selection, if the interest rate is higher than other fixed instruments, then it is a logical candidate to fund a tax-deferred plan. This is especially true if you have more rights to access your money in the annuity.

You also often have more liberal invasion rights with a fixed annuity than you do with a CD. Traditionally CDs allow you access only to the interest until the due date. Many fixed annuities offer that option plus the right to as much as 10 percent of the principle with no penalty. Some companies even make it cumulative if you don't use it one year.

While you can ladder your CDs, schedule them for periodic due dates, you accept a lower rate of return when you do this in two ways. The first is by using a shorter period for some of the CDs, therefore a lower rate. The other way is by breaking your money down into several smaller CDs.

It makes sense to look at fixed annuities as part of your financial plan. Just like any investment, you need to diversify and not put all your eggs in one basket, but a fixed annuity could be a very beneficial basket to use when you want a safe and secure investment. - 31884

About the Author:

Ryan N. Matthew provides the latest advice, marketnews, and facts that investors should consider before choosing the best anuity insurance for their retirement. Choosing the best annuity is a big decision and you should get all the facts, and look at all the annuity options. Come see us to learn more about annuities, or to get the best fixed annuity quote.

Best Fixed Annuity - All The Different Options That Go Into Assessing The Right Annuity

By John C. Ryan

Those seeking the very best fixed annuity available needs to look towards one that serve your needs in the best manner. Not every individual that opts to purchase an annuity wishes to use the money immediately. In this particular case, an anuity can be considered a deferred annuity. Others that absorb the money immediately to use their annuity for immediate purposes as companies will vary the amount of interest they receive. This is done when they offer the product. In general, outcomes will vary based on whether one opts to take it immediately or defer the payment. That is why it is best to seek an annuity that is best for the situation.

Not only is the rate important when choosing your annuity insurance contract, but the length of time you receive that rate is another important factor to consider. Is the higher rate locked-in for a year or is it longer? Does the high rate include a bonus rate, which you'll only receive on deposit and then the rate drops dramatically? You need to investigate these things when you're looking for the best annuity.

Every annuity is accompanied by a basement guaranteed rate. This rate can be considered the lowest among the company will pay and this matters not what the rate conditions are. These rates may look quite low in good times and often that rate can be a great incentive to add to the annuity when the rate drops dramatically everywhere else.

When you need to find out if you can add the annuity later, you can do so later. This can occur when you seek a deferred annuity. There are companies that might allow one lump some and then you will be required to purchase another product later.

Annuities have other factors besides rate, which you need to look at when separating the best annuity for your particular situation. The length of the surrender period is often extremely important. If you want to use the funds later but don't want to take annuity payments, you need to find out how soon the money is accessible to you without a penalty.

Look to see if the annuity offers a fee free withdrawal privilege as various companies will offer a one time 10% withdrawal with no penalty and while other systems will be more liberal. When you find an annuity that comes with a high interest rate, you will discover they often come with longer surrender periods. The longer period is usually not helpful for those people nearing retirement. The exception to this would be a helpful free withdrawal that fits properly into their schedule. There are liberal ones that will allow 10% per year are decent but cumulative withdrawals. That means you will be allowed to remove 10%. Those that do not use it will discover it adds to the next year which is helpful.

Ask for a quote if you're taking payments from the annuity. If you take a lifetime of payments that you can't outlive, you need to remember that if you pass away, your payments stop. That means that if you put $100,000 into an annuity and took only one payment then passed away, the insurance company keeps the rest. One way to avoid this is to take a lower payment that guarantees a specific number of years of payments, a return of principal or adds a second person as an annuitant.

The best annuity for one person's situation does not necessarily yield the best one for another person. That is why it is best to get several quotes while seeking the advice of a helpful annuity specialist. - 31884

About the Author:

John C. Ryan provides the latest info on anuity insurance. For more information on how to pick the best fixed annuity for you.

Selling Your Annuity Payments

By Chet Dowser

Have you got an annuity payment that arrives for deposit into your bank account on a monthly basis? If this is so do you realize you can sell annuity payments that you receive monthly for an one pile sum? Would it not be nice to have all your money at one point rather than getting a little of the larger pot on a once per month basis?

When you sell your allowance payments you'll be giving up that monthly earnings. However, in several cases, folk find better uses for the cash if they'd it in an one-off lump sum payment. For instance, if you inherited a pension payment, then if you would sell pension payments for the one-off sum amount then you would be ready to put on a down payment on a home or pay for your youngster's college education fees. There are many other things which the cash could be used for, so I you want to find out how to sell pension payments, then continue to read.

The Facts

Here's a list of steps that you may use as a guide to help you find the simplest way to sell pension payments :

Contact the insurance company first and see whether there's a way that you can cash in on the annuity for its worth instead of really selling it. You could possibly finish up with more of the money this way, instead of having to pay the fees that happen when you sell allowance payments. You may quite likely have to pay some type of a penalty for cashing it in. Bear in mind that each annuity can come with different terms, so you will not know the terms if you do not call and ask.

Contact a company, on what's called the secondary market, that will buy the annuity off of you. Make sure that you ask them for a free quote. You'll find a selection of firms who offer this service when scouring the Internet or you could just ask your insurance corporation for a suggestion. Whatever you do, check out the corporation's reviews from other sellers to see what type of reputation that they have. And, don't settle for the first quote ; make sure that you do some comparison shopping in order to find the best deal.

Compare the quotes that you receive from both the insurance corporation and the companies on the secondary market. The cash is yours and you don't want to have to give part of it to the company. By comparing quotes that you received to sell allowance payments, you'll be better in a position to compare which company will offer you the best rates/penalty fees.
So, if you would like to get your allowance payments as an one lump sum rather than a once per month payment, then use this guide to help with the method of how to sell annuity payments. In the end, you may be glad that you got several quotes and compared the offers. - 31884

About the Author:

Go to Sell Annuity Payments to get free information on this product. This website will give you all of the information you need on Sell Annuity Payments along with a lot of other free information. Don't miss out on this new website if you are looking for Sell Annuity Payments.

Things To Consider When Choosing the Best Fixed Annuities

By John C. Ryan

A fixed annuity may sound confusing at first but if you understand how a CD works at a bank, you have the basic knowledge for fixed annuities. Annuities have other features besides a rate guarantee that make it an interesting choice over a CD. There's a little more information to look at to see if this type of investment vehicle is right for you.

There are two different ways to used fixed annuities. The first is an immediate annuity. In this case, you take smaller equal payments over a set period. The time may be your lifetime, the lifetime of your spouse and yourself, a specific number of years or you can request a specific payment amount and let the company tell you how many payments it lasts. A deferred annuity does just as the name implies, defers the payment to a later date.

Annuities are for retirement money and receive tax-deferred growth. As with any retirement vehicle from an IRA to a pension plan, if you take the money out of a fixed annuity before age 59 in most cases, you pay a penalty. In this case, it's 10 percent of the growth. There are exceptions to this rule. Lifetime payments or payments that last to the age of 59 or for at least 5 years if you're between the ages of 54 to 59 . You or your family also doesn't have to pay IRS penalties if the owner/annuitant dies or becomes disabled.

Penalties for early removal of money don't stop with the IRS, insurance companies impose them too. Just like a CD, a fixed annuity has an early withdrawal penalty. It often ranges between four and seven percent. This normally gets smaller the longer you wait to take money and eventually disappears on most contracts. Some contracts, particularly those that pay a high rate, always have a surrender fee unless you annuitize. Occasionally they impose the same fee on beneficiaries. If you plan to take payments, it's not a problem.

There are exceptions to the surrender charge. Many contracts offer the ability to remove funds of as much as ten percent without penalty. This amount may be available each year or once for the life of the contract. Almost every annuity allows you to take the interest penalty free each year and some people use the annuities that way, just as they'd use a CD.

Even though you may allow your CD to roll over, you still have to pay taxes on any interest you earned. This isn't true for an annuity. As long as you don't remove the money from the contract, you don't have to pay taxes on the interest. Even if you want to take some of the principal and leave the interest in the contract, the IRS looks differently at your distribution. Annuity tax laws use LIFO rules. That means, last in, first out. Interest is always the last thing into the contract so the IRS considers the initial money you take as interest until you reach the amount you originally invested.

Immediate annuities have different tax rules. If you use the fixed annuity as a deferred annuity and then annuitize it later, it follows these rules also. Part of the payment each year is principal and part of it is interest, according to the IRS regulations.

To calculate the amount you pay in taxes each year you use an exclusion ratio. The exclusion ration is how much you exclude from that contract's income. To find it, you need to know three things; your life expectancy, your payment and the amount you invested. You simply multiply your payment times the number of years for life expectancy. If you receive $800 a month and have a life expectancy of 22 years, you'll get approximately $211,200 over the lifetime of payments if you collect in full. If your initial investment was $100,000, you divide that number by 211,200 and get an exclusion rate of 47 percent. In this case, you'd only pay taxes on 53 percent of your annual income from the fixed annuity.

People often select fixed annuities because they either love the idea that they'll never outlive their money, find it a useful tax-planning tool or simply like the high rate and ease of use. Many financial planners suggest that individuals divide their funds into several different vehicles for higher returns and a safer investment strategy. Often seniors fin that a fixed annuity is a great way of establishing a base income in addition to social security or their pension. They know they'll never run out of money, have a higher payment than an interest payment and can allow other funds to grow at higher rates of return. - 31884

About the Author:

John C. Ryan writes about annuity insurance, and advises how to find the best annuity given your particular situation. Want to learn more?? Come see us, to learn more about fixed annuities .

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We also use third party advertisements on this website to support our site. Some of these advertisers may use technology such as cookies and web beacons when they advertise on our site, which will also send these advertisers (such as Google through the Google AdSense program) information including your IP address, your ISP , the browser you used to visit our site, and in some cases, whether you have Flash installed. This is generally used for geotargeting purposes (showing New York real estate ads to someone in New York, for example) or showing certain ads based on specific sites visited (such as showing cooking ads to someone who frequents cooking sites).

DoubleClick DART cookies
We also may use DART cookies for ad serving through Google’s DoubleClick, which places a cookie on your computer when you are browsing the web and visit a site using DoubleClick advertising (including some Google AdSense advertisements). This cookie is used to serve ads specific to you and your interests (”interest based targeting”). The ads served will be targeted based on your previous browsing history (For example, if you have been viewing sites about visiting Las Vegas, you may see Las Vegas hotel advertisements when viewing a non-related site, such as on a site about hockey). DART uses “non personally identifiable information”. It does NOT track personal information about you, such as your name, email address, physical address, telephone number, social security numbers, bank account numbers or credit card numbers. You can opt-out of this ad serving on all sites using this advertising by visiting http://www.doubleclick.com/privacy/dart_adserving.aspx

You can choose to disable or selectively turn off our cookies or third-party cookies in your browser settings, or by managing preferences in programs such as Norton Internet Security. However, this can affect how you are able to interact with our site as well as other websites. This could include the inability to login to services or programs, such as logging into forums or accounts.

Deleting cookies does not mean you are permanently opted out of any advertising program. Unless you have settings that disallow cookies, the next time you visit a site running the advertisements, a new cookie will be added.

disclaimer

CONTENT DISCLAIMER

The information contained in this website is for general information
purposes only. The information is provided by this website and
while we endeavour to keep the information up to date and correct,
we make no representations or warranties of any kind, express or
implied, about the completeness, accuracy, reliability, suitability or
availability with respect to the website or the information, products,
services, or related graphics contained on the website for any
purpose. Any reliance you place on such information is therefore
strictly at your own risk.

In no event will we be liable for any loss or damage including
without limitation, indirect or consequential loss or damage, or any
loss or damage whatsoever arising from loss of data or profits
arising out of, or in connection with, the use of this website.
Through this website you are able to link to other websites which are
not under the control of this website.
We have no control over the nature, content and availability of
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imply a recommendation or endorse the views expressed within them.
Every effort is made to keep the website up and running smoothly.
However, this website takes no responsibility for, and will not
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technical issues beyond our control.

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