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Annuities
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Types of Annuities
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The Different Phases of an
Annuity
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Fees, Expenses and Bonuses
to Watch For
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Sub Accounts
-
1035 Exchanges
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Annuities
An annuity is an
investment contract with an insurance company, where in return for your paid
premiums, the insurance company agrees to make periodic payments to you at
specified dates. Interest earned is tax-deferred until withdrawals are made.
Rates may be fixed or variable. Annuity earnings do not offset social
security payments.
Annuities originated in
the Roman days when citizens would make a one-time payment in exchange for
annual stipends. However, it was in 1653 when Lorenzo Tonti of France, in an
effort to raise money for France’s war efforts, reinvented and popularized
the concept of an annuity lottery.
The concept was wild. A
group of individuals would raise capital and form a tontine. The parties
would make a one-time contribution and receive interest on their investment
until their death. When a member died, the pool of funds would get
redistributed to the remaining members, therefore increasing their
investment. After a predetermined number of years lapsed (a decade or two),
the remaining funds would be distributed to the surviving members. In some
situations, the last member surviving would receive the entire pool of
funds. It was a form of lottery. Guess what happened? Yes, the members
started killing each other off to get a bigger share of the pool! Of course,
the concept was picked up by other countries, like Britain and the U.S.
Eventually the “survivor take all concept” was outlawed. When the depression
hit in the 1930’s, there was an emphasis on savings. The general feeling was
that insurance companies were safe and would be around to make the payouts.
Deferred and immediate income annuities grew as acceptable investment
products because of the economic conditions of the time. Currently,
estimated annuity sales exceed $200 billion dollars annually and are
growing.
Please choose the subject of your interest from below or from the left side
column.
-
Types of Annuities
- The Different Phases of an Annuity
- Fees, Expenses and Bonuses to Watch For
- Sub Accounts
- 1035 Exchanges
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