Annuities are the only product designed to guarantee a lifetime income. Annuities are designed as retirement vehicles and as such are tax-deferred.  This means an annuity can offer the advantage of not having to pay taxes on your earnings each year--until you withdraw your funds.  This tax-deferral can help the account value increase faster than non-tax-deferred investments due to the effect of compounding the interest without losing part of it each year to taxes.  Of course, as with most retirement plans, when you take withdrawals you will pay ordinary income taxes.

There are different types of annuities.  You should consider the characteristics of each to see which annuity may be right for you.

Fixed Annuities

Fixed annuities are the easiest annuities to understand.  Generally, a fixed annuity pays a stated interest rate.  This interest rate may be fixed for the entire term or may fluctuate with a new rate being announced each year.  Usually, there is a minimum interest rate which indicates the lowest interest rate that you may earn on your annuity. 

Usually, the interest on a fixed annuity will provide an interest rate that is usually higher what you may receive in a savings account without the volatility or uncertainty of stocks or bonds.  Unlike stocks or bonds, the interest and principal on a fixed annuity are guaranteed by the issuing insurance company.

Most annuities allow you to withdraw a certain amount each year free from surrender charges; this amount may be interest earned or from 5 to 15% each year.  If withdrawals above this amount are taken before the surrender period ends, a surrender charge may be incurred.  While good planning usually provides adequate income to meet monthly or annual income needs, it is important to make sure you know the terms of the annuity and have adequate liquidity to meet your needs.

As retirement investments, annuities may incur tax penalties if withdrawals are taken before age 59 1/2.  There are numerous exceptions to this rule, but it is important to understand that withdrawals before age 59 1/2 should be planned carefully or a tax penalty may apply.

In conclusion, fixed annuities can help to provide a safe, fixed income source free of the risk and worry associated with the stock market to help you meet your retirement income needs.  Moreover, this income can be guaranteed to last your entire lifetime.  For more information or to get a FREE RATE QUOTE, complete the contact form, call (530) BIG-PLAN, that's 244-7526, or e-mail us at .


Index Annuities

Equity Index Annuities provide a return based in part on the performance of some equity index such as the S&P 500.  So like other equity investments, your income has the potential to grow faster if the equity markets perform well.  However, unlike other stock investments, you are given some guaranteed interest and return of principal in an Equity Index Annuity if you hold it till maturity.

Like all annuities, an index annuity is a retirement investment and is therefore tax-deferred; so you do not pay taxes on your earnings until you take withdrawals from an index annuity.  You also have similiar rules for early distributions before age 59 1/2.

There are numerous different crediting methods of index annuities and you should seek assistance in determining which one may be suited for your needs.  One important consideration is how do distributions affect the crediting of your earnings.  Many agents may not discuss this aspect adequately but it is important to understand if you plan on taking distributions before the maturity date of your equity index annuity.

We offer many different indexed annuities and will be happy to review these with you to determine whether a fixed or an equity index annuity or some other investment is right for your particular needs.      For more information or to get a FREE RATE QUOTE, complete the contact form, call (530) BIG-PLAN, that's 244-7526, or e-mail us at .

    Tom Wood is Licensed Life & Health Agent, California Life License # 0B85106

Fixed Annuities are products of the insurance industry and are designed for long-term retirement investing. Annuity guarantees are subject to the claims-paying ability of the insurance company. Surrender charges may apply if money is withdrawn before the end of the contract. All withdrawals of tax-deferred earnings are subject to current income tax, and, if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Annuities generally contain fees and charges which include, but are not limited to, sales and surrender charges. Additionally, if purchased within a qualified plan, an annuity will provide no further tax deferral features. The contract, when redeemed, may be worth more or less than the total amount invested.  Consult your tax advisor for more information.

Equity indexed annuities are long term retirement savings programs.  Investors should understand that these products have the potential to offer returns that may be greater than that of fixed annuity products, however, they are not direct investments in the stock market and will not produce returns consistent with the underlying index that they are based upon.  Equity indexed annuities typically subject an investor to surrender charge periods that last several years and withdrawals made prior to age 59 1/2 may be subject to a 10% federal tax penalty.  Additionally, if purchased within a qualified plan, an annuity will provide no further tax deferral features.  All guarantees of an equity indexed annuity are subject to the claims paying ability of the issuing insurance company.  The contract, when redeemed, may be worth more or less than the principal amount invested. Equity indexed annuities vary greatly and investors should seek the assistance of a financial professional to determine if an equity indexed annuity is suitable for their personal situation. 

S&P 500 is a registered trademark of Standard & Poors. Indexes cannot be invested in directly, are unmanaged and do not incur management fees, costs and expenses. Past performance is not a guarantee of future results.