Retirement is a huge concern for many these days. The average American has lost as much as 30 percent in his IRA/401(k) retirement plan in the recent economic downturn. Stock market volatility has left investors feeling like they're on a roller coaster ride, and it may be that way for some time to come. If you are looking for a place that will pay credited interest and offer protection from steep market falls, you can now have it with an annuity.
When I came into the insurance business in late 1979, I didn’t think annuities were such a good deal for a number of reasons. When a client put in $100,000 and got his contract back, it often read $96,000, as sales commissions came off the top. The interest rates were low and options often limited to a 10-year certain, 20-year certain and life option. Unfortunately, if the annuitant died, any remainder would go to the insurance company. If a client lived seven years on a 10-year annuity, his spouse would get the remainder three years. Those were pretty much the choices.
UNCLE SAM WANTS HIS CUT
Taxes were also a big problem, especially for high-net-worth individuals who did not spend down their annuity prior to death. When trying to pass on the annuity to their heirs, anyone with an estate of $2 million ($3.5 million now) faced estate taxes AND income taxes for a whopping 75 percent bite. Remember that IRA's are subject to income taxes.
Enter the 401(k). In the 80's and 90's 401(k) and IRA's dominated the retirement market. It was not until the early 2000's that many
