Annuities come in different shapes and sizes, and it’s helpful to know the difference if you’re planning to add them to your financial portfolio. Grab your thinking cap, and let’s see how many terms you understand.
How many types of annuities are there? Currently, there are 12 types of annuities, which are immediate, variable, fixed, fixed indexed, long-term care, two-tiered, QLAC, secondary market, structured settlements, Medicaid, charitable gift, and deferred income annuities.
What’s the best age to buy an annuity? Typically, the best age to purchase an annuity is age 40 or older, depending on the annuity’s intention and the targeted age of retirement. After age 40, a contract owner accumulates the retirement saving conservatively or calculates how much income could be generated from an annuity’s income rider at the targeted retirement age.
Are annuity payments taxable? In most cases, payments are taxable. Structured Settlements and Roth IRA annuity payments are tax-free.
What are annuity fees? Fees reduce the value of an annuity. They help cover the insurer’s costs to sell and manage the annuity and pay benefits. The insurer may subtract these costs directly from the annuity’s value. Most annuities have charges, but they can be different for different annuities.
What’s the exclusion ratio? A fraction is used to determine the amount of annual annuity income exempt from federal income tax. The exclusion ratio is the total contribution or investment in the annuity divided by the expected ratio.
How do annuities payout? Annuities can payout in two distinct ways: annuitization (an irrevocable payout) or Guaranteed Lifetime Withdrawals (revocable payout) from an optional income rider.
How do annuities work at death? In general, with deferred annuities, beneficiaries receive the remaining annuity’s accumulation value in a lump sum if the annuitant didn’t start the annuitized annuity payments. Annuitized retirement plans may or may not have a death benefit.
Is there any advantage to owning an annuity jointly? Internal Revenue Code (IRC) Section 72(s) states that either joint owner triggers the death benefit on a jointly owned annuity. Regardless of which joint owner passes away first, the surviving joint owner can receive the death benefit as the primary beneficiary.
Adapted from The Annuity Expert2
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.