Variable Annuity Comparison

The variety of financial tools and services available today has multiplied dramatically from a generation ago. On both the personal front and in the business sector there has been a dramatic increase in the number of products available, the methods by which they are delivered and the services they require.

The internet is a perfect system for laying out preliminary information in the financial services industry, where product options can get complicated fairly quickly. Businesses of all sizes that are engaged in some portion of this industry are finding that a website makes good business sense.

An enormous amount of financially related business is still done at the local level. Mortgages, auto and home loans and insurance policies are still usually secured from a local agent. The small businessman engaged in providing such products need only think about the amount of time he or she spends on the phone explaining the basics of their services to realize how much time a website could save them.

When a customer calls about auto insurance, think about the ability to refer the caller to your website to learn about the required minimum coverage, about the relationship of the vehicle’s value, about the relationship of personal injury coverage to health insurance.

Think about having a website that explains the four or five home mortgage options that are available, about how they are affected by down payment, credit history and loan amount. Consider the enormous number of variables available in health insurance for both individuals and families, and envision a chart on your own website that explains how those policies work.

That’s only a start on the types of benefits a website can provide to a small businessman or regional company in the financial services business. Your website can provide explanations, charts, even video clips explaining:

* Retirement planning
* Medicare insurance options
* Home loans, including specialties such as tenants-in kind
* Real estate history and trends in your area
* Auto insurance, including the effects of driving records and assigned risk
* Investments – mutual funds or annuities? Stocks or CDs?
* Estate planning
* Health insurance – a new policy, or COBRA?

These are a few examples plucked from a vast array of financial services that are out there today. Your website can become your reference library, your consulting tool, and your business partner when it comes to educating your clients. Websites provide multidimensional explanations of material in a far more effective fashion than brochures. No matter how glossy, stacks of paper that use terms only half understood are intimidating to people.

Your website can have an entire dictionary section, so that potential customers can learn terminology at their leisure, rather than ask embarrassing questions. And of course, the fewer questions they have when they pay a call on you, the less time is consumed in moving towards a potential sale.

Use the graphics capability of a website to maximize the attractive nature of your particular company. Take advantage of a personalized business website to explain why your services are better, unique, priced more reasonably, performed more thoroughly. With any complex financial product, you’ll need to explain how your selection of products can meet an entire range of consumer needs. Your website can do that for you.

Financial products can be presented online just as attractively as real estate is today. For every financial product, there is a personal benefit that can be reinforced with images. For products with multiple options and complex purchasing decisions, a website provides a consumer with an invaluable tool that is available 24/7. Your potential customer won’t be sitting across from you, concerned that there’s been a question missed or an issue not fully understood. A website is like an office staff to a financial services professional: there’s no better business for harnessing the efficiency of the new technology.

Talking about currency values can give most people migraines who may avoid comprehending a valuable piece of information which is crucial when it comes to investments. Present value of money involves the preference of investors who would rather have a set amount of money right now, instead of waiting to receive the same amount in the future.

The present value of money is affected by factors such as inflationary risks and opportunity costs. First, lets define the future value of money. When we talk about the future value of money, we are referring to the interest a set amount of capital will be worth in the future, this concept can be applied to funds deposited in an interest bearing account.

Now that we have established that the present value of money is very important we can analyze how this value can be affected by economic variables such as inflation which involves a constant rise in price levels in relation to a standard purchase power. In other words, a million dollars today is much more valuable than a million in ten years because inflation may raise the price of goods resulting in diminished purchase power and lost interest.

A simple example to illustrate the situation depicted above could be the following:

Lets imagine someone wins the lottery, sells a property/business or settles a case for monetary compensation. Following any of these situations the recipient will end up getting paid several small installments over a set period. If this is the case the total amount of money will get depreciated as time goes by. Ten years latter the interest that could have been earned (opportunity cost) is lost and since prices may have gone up by the effects of inflation now less things can be purchased with the same capital compared to ten years in the past.

Business or property notes, structured settlements and lottery winnings are all instruments that if properly handled can yield attractive return on investments. Now, in terms of settlements, payments that are due are basically interest that hasn’t been earned yet. When lawsuits and cases are settled, at times the insurance company invests the settlement amount in an annuity (which is a stream of fixed payments which will be received over a specified period). This funds monthly payments, which is a combination of principal and interest derived from the capital invested. It is for this present value factor that insurance companies pay in installments rather than pay the entire amount. This makes insurance companies extremely profitable in a settlement case.

As you see whoever takes advantage of the present value of future payments first (whether it is you or insurance companies) get the full benefits of a precious investment.

What exactly is Equity Release?

The equity or value in your home is its open market value, minus any mortgage or other debt you have secured against it. Equity Release is a way of accessing the cash tied up in your home, without having to move out.

How do I get my money?

You usually receive your money as a cash lump sum, to use as you wish. This varies from plan to plan, and differs depending whether you opt for a plan that provides cash upfront, or an income plan.

Equity Release — Key Facts

• To qualify for Equity Release, you must be over a certain age. Age limits vary between companies, but for individuals in the UK you must be at least 50 years old
• You can get a cash lump sum, regular income, or both, to use as you need
• You can continue to live in your own home
• You may continue to be responsible for the maintenance of your home

The two main types of Equity Release product are Home Reversion Plans and Lifetime Mortgages.

HOME REVERSION EXPLAINED

What is Home Reversion?

A Home Reversion Plan allows homeowners to release a lump sum from their property, without concerns over future house prices, or the effects of roll up interest.

How does it work?

With a Home Reversion Plan (also known as home income plans) you sell all or part of your property to the plan provider. In return you get a cash lump sum or income. As you are selling your property in exchange for the equity released, the plan provider is taking the risk on future house prices.

Your home, or the part of it you sell, belongs to the buyer or reversion provider, but you are allowed to carry on living in it. This means you will be selling the legal ownership of your home but will be guaranteed the right to live there for as long as you wish, by way of a lifetime lease. In the case of joint applications, this is applicable to both parties, so that both your interests are fully protected.

The complexities of each scheme vary; for example you may be expected to remain liable for repairs to the property, or there may be restrictions that apply.

Your age is a primary factor in determining the allowable percentage released on the survey value of your home. Other factors, such as your gender and the estimated future value of your property, will also be taken into consideration.

Any secured loans or mortgages must be paid off on the sale of your house, so a Home Reversion Plan may be unsuitable for anyone wishing to leave the equity in their property as an inheritance for their next of kin.

Is it right for me?

A Home Reversion Plan can be a useful way of releasing equity from your home, especially if you do not want the stress of moving or downsizing, but you must be sure that it is right for you and suits your particular circumstances and needs.

It is important to remember that with Home Reversion you no longer own your home (even if you only sell part of it). Depending on the particular plan, you may have to maintain the home while you live in it. You’ll also be under a secure tenancy, so will have to follow all of the terms of the lease. If you choose a rent-back option, you will have to make regular rent payments.

LIFETIME MORTGAGES EXPLAINED

What are Lifetime Mortgages?

With Lifetime Mortgages, you take out a loan that is secured on your home. There are a number of different kinds of Lifetime Mortgages available:

A Roll-up Lifetime Mortgage

“Rolled up” means interest is added to the loan over a set period of time, for example, every year. The loan gives you a lump sum or regular income and you are charged a monthly or yearly interest, which is added to the loan. When your home is eventually sold, the amount that you originally borrowed, including the rolled-up interest, is repaid.

A Fixed Repayment Lifetime Mortgage

With this kind of Lifetime Mortgage you get a lump sum, but do not have to pay any interest. Instead of paying interest, when the home is sold, you have to pay the lender a higher amount than you originally borrowed. That amount is agreed in advance with the lender. The lender then uses this higher sum to repay the mortgage when your home is sold.

An Interest-only Lifetime Mortgage

With an interest-only Lifetime Mortgage you get a lump sum upfront and pay a monthly interest on the loan, which can be either fixed or variable. The amount that you originally borrowed is then repaid when your home is sold.

A Home Income Plan

With Home Income Plans the money you borrow is used to buy a regular fixed income for life (also called an annuity). This income is used to pay off the interest on the mortgage and the rest is yours to use as you wish. The amount that you originally borrowed is repaid when your home is sold.

Shared Appreciation Mortgages

Some Lifetime Mortgages include a shared appreciation element. This means that the lender has a share in the value of your home.  These kinds of plan are now less popular and less frequently available.

When taking out a Lifetime Mortgage, you can choose to either borrow a lump sum or to opt for a drawdown facility. A drawdown is suitable if you want to release occasional small amounts rather than one big loan upfront, as it means you only pay interest on the money that you actually need at the time.

How does it work?

Like a normal mortgage, you borrow money that is secured against your home. Your home still belongs to you and is not sold as part of the Lifetime Mortgage.

With the exception of roll-up schemes and fixed repayment Lifetime Mortgages, you will have to pay interest on the loan each month. When you die or move out of your home, the property is sold and the money from the sale is used to pay off the loan. Anything left after the loan has been repaid goes to your beneficiaries.

Is it right for me?

This depends on your age and personal circumstances. Lifetime Mortgages can be a flexible way of releasing equity from your home, but you must make sure it suits your particular situation.

There are a number of things to consider:

• With a Roll-up Lifetime Mortgage the interest you owe can increase quickly. Eventually this might mean that you owe more than the value of your home, unless you have a no-negative-equity guarantee from the lender.

• A Fixed Repayment Lifetime Mortgage is a better deal if you live much longer than the lender thinks you will. But if the home is sold much earlier than you originally planned, you will get a worse deal.

• With Interest-only Lifetime Mortgages with variable interest rates, the interest rate may rise faster than your income.

• A Home Income Plan only results in a small income after the interest has been paid. These kinds of plan are usually only suitable if you are older.

Remember that you will be expected to ensure that your home is in good condition and remains well maintained. You may need to set aside money to do this when first entering into the plan.

What does it cost?

For both Lifetime Mortgages and Home Reversions, you will have to pay for the following:

• An arrangement fee for setting up the plan
• Legal fees
• Valuation fees
• Buildings insurance

With Lifetime Mortgages some of these costs can be added to the loan so you pay less upfront, but you will pay interest on any amounts added to the loan.

Things to think about!

Remember, it is important to be aware of the different products available and the positive and negative points of each type of plan. As with any big decision, you need to explore all the options available to you first. It is recommended that you seek advice before deciding on what route is best for you. 

As it is an important decision about your home and your future, it is also recommended that you consult your family if you are considering any Equity Release product. 

Remember that Equity Release is not right for everyone. Do your?Homework, seek legal advice, and explore all the options available to you.

Make sure that a particular plan is suited to your own circumstances and needs before you proceed.

Gets your attention, doesn’t it? The unfortunate thing though, is that most people will react negatively to this intentionally inflammatory, media-ready, title statement. Has some Wall Street virus attacked our financial experience memory chip? Bouncing around unpredictably is precisely what the markets have always done. In the last forty years, there have been no less than ten 20% or greater corrections followed by rallies that brought the markets to significantly higher levels. Volatility is not a bad thing— a non-event, even.

Ironically, it is this routine volatility (caused by hundreds of human, economic, political, and natural variables) that is the only real certainty existent in the financial markets. Would anyone be happy with market prices that didn’t change? Should anyone expect market valuations that only go up? So what’s all the anxiety, scrambling, and crying about? As absurd as this may sound at first blush, you will never become a successful investor until you are able to embrace market volatility as your dearest and closest friend.

The Wall Street media is also your friend, because it fans investor emotions to the point where rational thinking becomes impossible for most participants. My observation the other night at dinner (that the 400 point drop in the DJIA had provided an opportunity to purchase dozens of IGV stocks at bargain prices) was met with vacant stares. When I added that nearly half of those stocks had been sold profitably in recent weeks— you can imagine the shocked silence that followed.

Investor perceptions of volatility need to be rearranged. When you allow more than an up-only smiley face into your understanding of the markets, you will be able to position yourself to actually take advantage of the volatility while it is happening. When you realize that the causes of market gyrations are not nearly as important as the opportunities for bargain hunting and profit taking that they produce, you’ll be able to grow and to protect your portfolios from your emotional dark side.

Let’s talk about reality. There are many different ways that professional investors and speculators make their fortunes in the financial markets. The key is to know whether the path you are following is too speculative for the destination you are seeking. Over the past twenty years or so, the stock market has provided the best returns for most investors— yes, even better than commodities, currencies, and ETFs (which didn’t exist even ten years ago). But balanced investment portfolios, those containing both investment grade value stocks and income generating securities have probably surpassed all others.

Let’s talk about causation. There are far too many variables affecting the movement of security prices to allow for accurate prediction of either the scope or duration of short-term gyrations. Every rally produces both a bubble of some kind and the pin that will eventually do the bursting. Hindsight identifies all the culprits and promises to regulate them out of the system so that the future will be different. Don’t kid yourself. The next rally will come to the same bloody end as its predecessors. Volatility Rocks!

But this year we have the opportunity to assure that our economic future will be better. Much of the current skittishness in the financial markets is caused by multiple economic concerns and the incredibly naive resolution ideas being spouted by the presidential candidates. And there are other, somehow out of the limelight, economic issues that politicians are afraid to even consider. The primary economic issues (jobs, energy, and economic growth) need to be joined by Social Security reform, corporate tax reform, and term limitations in congress.

No president, no matter how bold, can bring about meaningful change without a less self-serving cast of characters in the legislative branch. But this kind of change can’t happen until we replace the current batch of pork barrel politicians with a new group of change orientated decision makers. Today’s congress legislates mind-numbing regulations that stifle creativity and economic growth. Investors need to support fewer “taxors” and to elect a whole new group of economic facilitators. Throw out the incumbents this November.

You just don’t create jobs by taxing, regulating, and otherwise strangling the job creators. In most communities, local governments think of their non-voting corporate citizens as ratables instead of as job providers. Serious jobs would be created, and general price reductions produced (good or bad for the GDP?), through a controlled elimination of all income taxation on legitimate corporate job providers. Of course it would have to be regulated to assure jobs, price reductions, and shareholder benefits, and not just more perks for obscenely paid executives.

Similarly, taxing gasoline production and delivery organizations is not going to bring down the price per barrel of crude oil. But “taxing” the cartel that fixes the prices instead of bribing them with protection from their enemies could work almost as well as tapping into our own abundant supply and adding some long-needed refining capacity. Eliminating state and federal gasoline taxes and fees and taxes on interstate truckers would produce many cost/price benefits as well.

Economic growth, more jobs, and lower prices could be the immediate result of two relatively simple changes that neither of the Presidential hopefuls have the courage to even whisper about. Without nearly enough detail: (1) Over a five-year period, change Social Security to a mandated-contribution, deferred, individual fixed annuity program managed on a flat fee basis by 15-year experienced insurance companies. No variable (stock market) benefit plans would be allowed; all citizens would be eligible to participate, and all employed persons (Congress included) would be enrolled automatically. Contributions would be reduced and employer participation eliminated.

(2) Eliminate all taxation on any form of retirement income immediately, and phase out all taxation on all forms of investment income over a five-year period. Replace those taxes with a 1% Federal sales tax an all goods and services except food, shelter, clothing, and health care.

Then, we can start to replace the Internal Revenue Code with something simple, protect shareholders from unconscionable corporate executive compensation, and come up with a solution for providing adequate healthcare to everyone.

We have met the enemy and he is us— Walt Kelly, Pogo

The majority of American households do have some variety of life insurance. But some of us understand how to get the most out of it. Five of the most damaging myths that lead to costly life insurance mistakes…

Myth 1: I just need enough life insurance to cover my family’s future expenses.

Fact: If you really want to provide for your family’s well-being, you’ll need more than that. The good news is that this extra coverage won’t set you back as much as you might think.

A typical family should combine the remaining portion of its mortgage … projected inflation-adjusted annual living expenses for the remainder of the spouse’s life … and college costs if they are a factor (assuming that costs will rise by 3% to 5% per year) to determine the amount the family needs to get by. Subtract the amount the surviving spouse will earn if he/she expects to return to the workforce at some point.

Example: A 40-year-old man who’s in good health would pay about $875 a year for a simple 20-year level-term life insurance policy that provides $1 million in coverage, and this would be enough to cover all his family’s future expenses.

And, for about $1,750, he could get a $2 million policy, enough to fully replace his lifetime earnings if his salary would have averaged $80,000 per year for the remaining 25 years of his career. An extra $875 per year (about $73 a month) is a small price to pay to ensure that his family won’t suffer financially after his death.

To compare life insurance costs, contact your insurance professional.

Myth 2: Term life insurance is always a better deal than whole life.

Fact: Term life insurance policies will usually provide lower premiums than a permanent cash-value policy like whole life, which combines the pure insurance of a term policy with a tax-favored investment account. But under particular circumstances – if you plan to keep the policy for more than 20 years … can afford the premiums … and have maxed out other tax-deferred investments, such as a 401(k) plan and an IRA-whole life insurance makes more sense.

Assuming that you don’t dip into your investment for at least 20 years, your total return from a whole life policy, including the death benefit and investment return, is likely to be higher than what you would earn by purchasing a similar amount of term coverage and investing the cost difference in municipal bonds – which is a comparable investment in terms of both risk and tax treatment.

Other permanent insurance options include variable universal life, which might be appropriate for younger couples in their 20s or early 30s, since the investment component could be put in high-growth mutual funds … and universal life, which can be appropriate for those whose income can fluctuate significantly from year to year, such as sales professionals, since it allows the insured to determine the premium paid in any year.

*Rates subject to change.

Other benefits of permanent (casb-value) insurance: You can borrow against the cash value of your policy at reasonable interest rates. Also, withdrawals up to the amount of your investment are tax-free.

Of course, permanent insurance loses its appeal if you need access to your money before two decades or more pass. Life insurance companies front-load their fees, so if you withdraw the money before then, your investment return will suffer disproportionately.

Myth 3: My wife does not work, so she doesn’t need her own life insurance policy.

Fact: Stay-at-home spouses might not produce income, but they often provide important services that are expensive to replace, such as cleaning, cooking and child care. Some spouses also find that their own ability to earn is temporarily reduced after the loss of a partner.

Example: A lawyer in private practice spent the year after his wife’s death walking around in a daze, causing his income to plummet.

Couples with children should have at least $1 million in coverage for the nonworking spouse, more if the family is large or lives in an expensive area. You can consider decreasing that figure if the kids are in their teens and reducing it again once the kids are out of the house. A 40-year-old nonsmoking woman in good health should be able to get a $1 million 20-year level-term policy for about $730 a year.

Myth 4: My term-life policy can be converted to whole life, so I don’t have to worry about losing coverage if I ever become chronically ill.

Fact: While it is true that more than two-thirds of term policies allow policyholders to convert over to whole life regardless of health problems, many “convertible” term policies can be converted only within a five or 10-year window – and insurance companies may not warn you when that window is about to close. If you don’t convert and the policy lapses, the insurance company gets to keep all the money you paid in premiums and won’t have to pay out a dime on the policy.

It is not uncommon for policyholders who have developed serious health problems to unwittingly miss their opportunity to convert to whole life and then find themselves uninsured and essentially uninsurable.

Self-defense: Make a habit of reviewing your policy at least once a year so that you won’t miss your chance to convert – or any other deadline.

Myth 5: I’m retiring soon, so I don’t need life insurance anymore.

Fact: This might be true in some cases, but life insurance can be useful for retirement planning and/or estate planning.

Examples…

*If your employer offers a defined-benefit pension plan, it probably has two payout options – a single life annuity, which provides income only during your lifetime, and a joint life annuity, which provides a smaller monthly payment until you and your spouse both die. In spite of these smaller payments per month, most married people choose joint life for the sake of their spouses.

Assuming that you are in good health, single life is a better choice if you also hold a life insurance policy with your spouse as the beneficiary. Should you die first, your spouse could live on the proceeds. It’s best to purchase the insurance a decade or more before you retire to lock in an attractive age-based rate.

*If you expect to have a large estate – $ 3 million or more – it may be wise to use life insurance to pay the estate tax. Too often, people don’t buy the proper insurance for this purpose. The usual choice is a “second-to-die” policy – one that pays out when the surviving spouse passes away. But when you crunch the numbers, second-to-die policies can be inferior deals for most couples younger than 60 … and any couple in which the husband is more than five years older than his wife or the wife is more than 10 years older than her husband, since women live an average of five years longer than men. In such cases, it’s better for each spouse to buy a separate policy.

Scenario: A husband and wife, each 45 years old and healthy, would pay an annual premium of about $11,000 for a $1 million second-to-die whole life policy. If they had bought separate $500,000 whole life policies, they would pay a total of about $17,500 in annual premiums. (The high cost reflects the lifetime coverage with this type of policy.)

At first glance, the second-to-die policy looks great; saving about $6,500 a year, but the insurer pays nothing until both spouses die. With separate policies, the insurer must pay out $500,000 upon the death of the first spouse. If the surviving spouse were to invest that $500,000, he/she could turn it into more than $800,000 in a decade, even at a 5% after-tax return.

Bonus: Once the first spouse has died, the premiums must be paid only on the remaining spouse’s policy, reducing costs.

Second-to-die policies do make sense if both spouses are over age 60 and close in age. In this case, the odds are lower that they will die many years apart.

Settlement Option: How a beneficiary is given disbursement of the death benefit. The company might pay one lump sum or institute a money market account in the recipient’s name and supply the recipient the option of leaving the funds in the account or withdrawing some or all of it.

Suicide Clause: A life insurance policy will not disburse a death benefit if the owner of the policy commits suicide within the initial two years after purchasing the policy.

Surrender Charge: If you cancel an annuity or life policy ahead of time, the company may subtract a fee from the sum it owes you.

TAMRA: Technical and Miscellaneous Revenue Act. A 1988 Federal law that formed a new category of life insurance contracts. The contracts’ policy loans and surrender costs are subject to taxation regulations comparable to deferred annuities.

Term Life: The most basic form of life insurance, it normally offers no cash value element. You pay a premium and the company guarantees to pay your beneficiary if you pass away. The policy lasts for a particular length of time or “term,” such as 1, 5, 10, 15 or some odd years, or to an elected age like 65 or 100. If you are still alive at the close of the term, the policy terminates unless the company concurs to restore it. Renewal premiums are dependent on your current age. Sometimes called “temporary insurance.”

Underwriting: The insurance company’s procedure for deciding whom it will insure. An underwriter’s verdict may be based on your application, physical exam, health records, and other information to conclude whether you meet the company’s standard.

Universal Life: A flexible-premium life insurance contract which accrues values and pays a death benefit. You select the policy’s premium and face total and you can alter these permitting the policy is in effect. It is feasible that the cash value will produce more than the guaranteed lowest interest rate. It is also feasible that the cash value will develop more rapidly than is necessary to cover the price of insurance.

Vanishing Premium: An insurance company’s prediction on an illustration signifying that your policy could accomplish a position where you would not have to pay premium payments because the policy would have sufficient cash value to encompass the premiums.

Variable Life: A sort of whole life insurance in which the face quantity and cash value count directly on the investment performance of a particular fund. Reserves are put in investment accounts that are disconnected from the company’s universal account. Most policies promise a lowest face sum, but a cash value minimum is hardly ever guaranteed.

Viatical Settlement: A concurrence to sell the rights of your life insurance policy to a different, unrelated person who becomes both the possessor and beneficiary of the policy.

Waiver of Premium: A stipulation that postpones your duty to pay premiums when you are immobilized or you meet some other policy prerequisite. This is a frequent feature in life insurance polices.

Whole Life: Life insurance with a savings aspect. Premiums normally are the same (rank) annually. When you are youthful, your premiums are more than the price of insuring your life at that point in time. The surplus amount builds up and resembles a savings account, called “cash value.” This surplus is utilized by the company to insure you in the future, when your level premium is not sufficient enough to cover you.

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Interested in creating a ‘family trust’ that can be used to benefit subsequent generation in a dynastic mode You can create an irrevocable life insurance trust that last a long time, but not in perpetuity. The trust will winding up at the end of…

can i find out if my recently departed mother had life insurance cannot find any documents but think she may?
cannot find policies but she had just recently moved house would there be any company i can check See the officials

can i have the list of insurance companies inindia?
to plan for children education. every life insurance company has a child policy (list of ins cos can be got from irda website also). child policy are of 2 types : 1) endowment type: you get a lumpsum at maturity 2) moneyback type: you get money spread over 4/5…

Can I lolly within my natural life insurance policy in a minute?
If there is currency value built contained by the policy, yes you can. There are two ways you can cash it out 1) You can borrow some of it and rate monthly interest on it. 2) Cancel the policy to get the dosh value, but…

Can I own group insurance for my entire domestic ?
What kind of insurance are you chitchat about? If this is vigour, yes you can have group or family circle health coverage (up to a indubitable age for children). If this is life insurance, most companies will allow you to attach riders to your policy, that way…

Can I purchase life insurance for a family member if I don’t know their SSN?
Over the last six years, five of my family members have passed away. The furneral expenses have been overwhelming. Just when we ge done paying off one another one arises. Currently my dad doesn’t look like he’ll make it through the next six…

Can I put natural life insurance on a senior aunt that lost mobility surrounded by her hand short her signature?
We will need this insurance to earnings for her funeral in perchance the next 5-10 yrs. Yes, assuming she’s insurable pursuant to the insurer’s underwrite guidelines. However, in writ to sign for her, you must have a…

Can I still be on my parents’ life insurance if i don not live in the same state as them? im 17?
/?? You’re on their LIFE insurance? Like, they have a Child Rider on your life, attached to THEIR policy? Sure. Where you live has NOTHING to do with it. I think there’s more to this…

Can if be possible ? how do i find out if relatives or family own done a energy insurance ?polocy on one?
i have hear life insurance polocies can be done on folks without the being knowing and when death happen moneys can be claimed. Going to need a starting point. A check to a company for…

Can just anyone take out life insurance on anyone else without telling that person.?
Can they make them self the beneficiary and claim the money when the person dies. To insure someone else’s life, you must have an “insurable interest” in that person. In other words, their death must affect you financially, such as a spouse, child, or…

Can my dad apply for existence insurance this slow?
My dad received a letter and application for life span insurance for $25,000 coverage. He got that almost a month ago but didn’t apply for it. He has no natural life insurance at all The memorandum said there is no medical nouns required. The application deadline is 2…

Can my husband collect his settlement structures?
My husband won a lawsuit for lead paint poison roughly 20 years ago in Boston, Massachusetts. He be a kid at the time so his mother, who was on drugs, be collecting the settlement structures through a life insurance company. Well she never received adjectives of the money because she was…

Can my husband receive the full 25g for a enthusiasm insurance policy his departed father took out 10 years ago?
My husbands father died 3 years ago. His step mother just call yesterday to inform him that she found a life insurance policy from prudential that his dad took out 10 years ago. My husband is scheduled…

Can one take out life insurance on you without you knowing?
Can one e.g. (boyfriend, husband etc.) take out life insurance on you without you knowing? If so, how can you find out who took it or, when did they do it and where was it taken out if it’s in the same state as you or out…

More insurance questions please visit : InsuranceFreeFAQ.com

The equity release mortgage (also known as a lifetime mortgage or a reverse mortgage) is becoming an increasingly popular method by which seniors can tap into the equity in their homes, providing them with cash in the form of a lump sum or supplementary income.

Who can get an Equity Release Mortgage?

There are a few simple criteria you must meet to be eligible.

• Be a UK Citizen
• Own your own home
• Be over a certain age (typically 55 to 62 depending on the individual scheme and the company offering it)
• Own a property worth at least £40,000 to £70,000 (again, the exact amount depends on the company offering the scheme)
• Some companies may allow you a small outstanding mortgage balance as long as you agree to pay it with funds from your equity release mortgage

How it Works

Most schemes allow you to borrow a cash amount that amounts to between 20% and 50% of the value of your property. The exact amount depends on your age (or your partner’s age-whichever is the lowest). In general, the younger you are, the lower the amount you can borrow.

You can receive the loan money as regular instalments, as one large lump sum, or in smaller lump sums at irregular intervals. Interest accrues on the amount you borrow, in the same way as with a conventional mortgage, meaning that interest will accrue more slowly if you choose to receive money via instalments rather than as one large lump sum.

The money you borrow via an equity release mortgage does not need to be repaid until the property is sold. At this point, the full balance of the loan is due, including interest.

There are four main types of equity release mortgage: home income plans, the interest-only mortgage, the lifetime mortgage, and the home reversion scheme.

Home Income Plan

The owner of the property takes out an equity release mortgage and uses the lump sum to purchase an annuity that provides income for life. Interest payments on the mortgage are deducted from the annuity. The mortgage does not have to be repaid until the home is sold.

Advantages

• You are guaranteed an income for life, and don’t have to worry about interest accruing, as this is paid from the annuity.
• The amount you owe on the mortgage remains constant-if the property increases in value over time, you or your heirs benefit

Disadvantages

• Inflation may reduce the value of the annuity over time.

Interest-Only Equity Release Mortgage

The equity release mortgage is used to provide a lump sum, and the borrower must make monthly interest repayments. The principal balance must be repaid in full when the property is sold.

Advantages

• The amount you owe on the mortgage remains constant, so any increase in property value benefits you or your heirs
• You have fixed monthly repayments (if you choose a fixed-rate mortgage)

Disadvantages

• You must be able to ensure that you can cover interest payments over the life of the loan
• Choosing a mortgage with a variable interest rate is risky

Lifetime Equity Release Mortgage

The equity release mortgage is used to provide either a lump sum or monthly instalments of cash (the borrower can also choose to receive a combination of both types of payment). When the property is sold, the balance of the loan, including principal and interest, is paid in full.

Advantages

• Provides a larger income than the home income plan or interest-only mortgage

Disadvantages

• It will be difficult to estimate the amount of equity left in the property until it is sold

Home Reversion Equity Release Mortgage

The owner of the property sells their home (or a portion of the equity) to a lender, and receives a lump sum or monthly income. The lender takes a share of the proceeds when the property is sold, taking a share that is proportional to the amount of equity they purchased. For example, if you sell 50% of the equity, the lender will take 50% of the proceeds from the sale of the property.

Advantages

• You will always know exactly how much equity you own
• You or your heirs benefit from an increase in property value
• No repayments-even interest-in your lifetime

Disadvantages

• The lender will not pay market value for the equity

Look for a SHIP-approved Equity Release Mortgage

Plans that are approved by the Safe House Income Plan guarantee that you will never end up owing more than the home is worth, even if the property market changes, and no matter how much interest you accrue. You cannot build up negative equity in the property, and will not pass debt to your estate in the event of your death.

As an investor, I’ve always wondered why Social Security is such a problem. What’s so difficult about managing this particular Trust Fund, and why is it so different from other investment accounts that pay out a constant stream of income? The private sector does it routinely with defined benefit pension plans and fixed annuities, so what’s the big deal? Is Social Security failing because it hasn’t been invested soundly, or is there some other reason?

The most obvious explanation is politics, but we’re running out of time for finger pointing, and Social Security is solvable in a surprisingly painless manner. It will require a whole new approach that uses old ideas and institutions in ways that most of us have pretty much given up on. As hopeless as the Bush Administration’s Nicotine Patch for Social Security would have been, it pointed in the right direction. Now don’t hit DELETE when I refer to “privatization”, or when I mention one of my own most hated financial products, the “annuity”. Both are needed to permanently fix the Social Security mess, to get it away from people who are neither managers nor investment specialists, and to make the whole system work more economically. The purpose of this article is to get you to think about it… and to elect a hero with the guts to fix it. Unfortunately, Joe DiMaggio has left the building!

Are you surprised that there is no “Social Security Trust Fund”… no investments and no Investment Managers? This is a gigantic Government designed and controlled Ponzi scheme that has worked incredibly well in spite of congressional tinkering and prohibitively high cost. There was always a tax plan for funding the benefits, but never an Investment Plan. And as difficult as it is for me to admit, no sophisticated Investment Plan is really necessary. We just need a new (reduced) contribution plan, one that isn’t designed to fund every politically sensitive entitlement that compromises itself down the aisle. We need a simplified benefit structure that supplements privately funded (untaxed) retirement programs. [Healthcare just has to be a separate issue, perhaps an actual (managed) Trust Fund, and certainly something that should not be funded by private citizens until there is meaningful tort reform in this country.] Pshew! Back to the point… We can eliminate all the unnecessary bells and whistles simply by mandating personalized benefit funding. Let the politicians deal with homeland security while the private sector deals with things financial.

After the repeal of the Social Security tax and implementation of mandated Individual Retirement Plan Contributions, the Social Security bureaucracy will retain several important functions: 1) Qualifying private sector companies and licensing them to provide Social Security Retirement Income Annuities (SSRIAs). Thousands of providers will be needed, but only, fixed income experienced, profitable companies need apply. 2) Developing a computerized system for participant/provider matching… inspired randomness is essential. 3) Proactive monitoring of compliance with the minimal rules, installation of fraud detection systems, and investigation of all violations by providers, participants, and retirees, 4) Keeping the plan sacred, simple, and principally unchanged by future legislation. The plan must be kept: simple and profitable for providers; painless and visible to participants; timely and comprehensible to retirees.

The SSRIA is a new and improved version of the ancient Deferred Fixed Annuity Contract… a boring but guaranteed retirement benefit vehicle, funded by both mandated and voluntary payroll deductions, with a whole bunch of new wrinkles that make it an ideal Social Security replacement program. For example, and unlike existing annuity contracts: 1) Participants will be allocated to “qualified SSRIA providers” so there will be no sales commissions, no business acquisition or retention costs, no advertising expenses, etc. 2) All SSRIA contracts (regardless of provider) will contain the same terms, interest guarantees, retirement benefit choices, and pre-retirement death benefits, thus eliminating any incentives for internal fraud and manipulation of statistics. 3) Qualified providers will establish separate subsidiaries to manage and control SSRIA operations and to assure that only high quality, income securities are used to fund future benefits. 4) All qualified providers will use the same mortality, investment earnings and expense assumptions, and all benefits will be fully guaranteed by the parent corporations.

The SSRIA is a supplemental retirement program, funded by a much smaller, yet flexible, payroll deduction, and it is designed to be the foundation of a retiree’s total retirement package… a benefit floor. Participants will choose (annually, for the following year) to deposit from the required 2% up to a maximum 4% of their Pre-Tax Income to their personal SSRIA, a contract that will follow them everywhere, from employer to employer, throughout their working years. Before retirement, a death benefit equal to the full cash value of the contract will be paid to the designated beneficiary. At retirement, participants can elect either a Life Annuity or a Joint & 50% Survivor Annuity. No variable plans of any kind will ever be allowed; there will be no loan privileges, withdrawals, or dividends. Providers are expected to make a reasonable profit, which will ultimately be determined by their operating and investing abilities… hmmm, I smell capitalism.

Employer sponsored benefit programs and individual savings and investments are expected to make up the bulk of private retirement programs. The SSRIA will assure that everyone has something, but individual savings and retirement plans, both company sponsored and personally funded, will be encouraged by new IRS policy. No retirement income, regardless of source will be subject to income taxation! Neither employers nor self-employed persons will be required to make matching contributions of any kind to employee SSRIAs. However, they will be encouraged to use their improved cash flow to increase employment or to reduce prices, perhaps by a new system that will reduce their corporate income tax obligations as a reward for boosting the economy. Similarly, billions of dollars of discretionary spendable income will find its way back into the economy from consumers whose payroll deductions have been slashed deservedly.

Subsequent articles will deal with: SSRIA Providers, Participation Rules, Transitioning the Change at Four Levels, and Dealing with the Obscenely Overpaid.

As an investor, I’ve always wondered why Social Security is such a problem. What’s so difficult about managing this particular Trust Fund, and why is it so different from other investment accounts that pay out a constant stream of income? The private sector does it routinely with defined benefit pension plans and fixed annuities, so what’s the big deal? Is Social Security failing because it hasn’t been invested soundly, or is there some other reason?

The most obvious explanation is politics, but we’re running out of time for finger pointing, and Social Security is solvable in a surprisingly painless manner. It will require a whole new approach that uses old ideas and institutions in ways that most of us have pretty much given up on. As hopeless as the Bush Administration’s nicotine patch for Social Security would have been, it pointed in the right direction. Now don’t hit DELETE when I refer to privatization, or when I mention one of my own most hated financial band-aids, the Annuity. Both are needed to permanently fix the Social Security mess, to get it away from people who are neither managers nor investment specialists, and to make the whole system work more economically. The purpose of this article is to get you to think about it—and to make you want to elect a hero with the guts to fix it. Unfortunately, Elvis and Joe DiMaggio have left the building.

Are you surprised that there is no Social Security Trust Fund—no investments and no Investment Managers? This is a gigantic Government designed and controlled Ponzi scheme that has worked incredibly well in spite of congressional tinkering and prohibitively high costs to everyone involved. There was always a tax plan for funding the benefits, but never an Investment Plan. And as difficult as it is for me to admit, no sophisticated Investment Plan is really necessary. We just need a new and reduced contribution plan, one that isn’t designed to fund every politically sensitive entitlement that compromises itself down the aisle. We need a simplified benefit structure that supplements privately funded and no-longer-taxed retirement programs. Healthcare just has to be a separate issue. We can eliminate all the unnecessary bells and whistles simply by mandating personalized benefit funding. Let the politicians deal with homeland security while the private sector deals with things financial.

After the repeal of the Social Security tax and implementation of mandated Individual Retirement Plan Contributions, the Social Security bureaucracy will retain several important functions: 1) Qualifying private sector companies and licensing them to provide Social Security Retirement Income Annuities, or SSRIAs. Thousands of providers will be needed, but only, fixed income experienced, profitable companies need apply. 2) Developing a computerized system for participant/provider matching—inspired randomness is essential. 3) Proactive monitoring of compliance with the minimal rules, installation of fraud detection systems, and investigation of all violations by providers, participants, and retirees. 4) Keeping the plan sacred, simple, and principally unchanged by future legislation. The plan must be kept: simple and profitable for providers; painless and visible to participants; timely and comprehensible to retirees.

The SSRIA is a new and improved version of the ancient Deferred Fixed Annuity Contract—a boring but guaranteed retirement benefit vehicle, funded by both mandated and voluntary payroll deductions, with a whole bunch of new wrinkles that make it an ideal Social Security replacement program. For example, and unlike existing annuity contracts: 1) Participants will be allocated to Qualified SSRIA Providers so there will be no sales commissions, no business acquisition or retention costs, no advertising expenses, etc. 2) All SSRIA contracts, regardless of provider, will contain the same terms, interest guarantees, retirement benefit choices, and pre-retirement death benefits, thus eliminating any incentives for internal fraud and manipulation of statistics. 3) Qualified providers will establish separate subsidiaries to manage and control SSRIA operations and to assure that only Investment Grade Value Stocks and high quality, income securities are used to fund future benefits. Index Funds and other high-risk securities and contracts would not be allowed, and equity-based investments would be kept below thirty percent of each providers separate SSRIA investment portfolio. 4) All qualified providers will use the same mortality, investment earnings, and expense assumptions, and all benefits will be fully guaranteed by the parent corporations.

The SSRIA is a supplemental retirement program, funded by a much smaller, yet flexible, payroll deduction, and it is designed to be the foundation of a retiree’s total retirement package—a benefit floor. Participants will choose (annually, for the following year) to deposit from the required 2% up to a maximum 4% of their Pre-Tax Income to their personal SSRIA, a contract that will follow them everywhere, from employer to employer, throughout their working years. Before retirement, a death benefit equal to the full cash value of the contract will be paid to one or more designated beneficiaries. At retirement, participants can elect either a Life Annuity or a Joint & 50% Survivor Annuity. No variable plans of any kind will ever be allowed; there will be no loan privileges, withdrawals, or dividends. Providers are expected to make a reasonable profit, which will ultimately be determined by their operating and investing abilities—hmmm, I smell capitalism.

Employer sponsored benefit programs and individual savings and investments are expected to make up the bulk of private retirement programs. The SSRIA will assure that everyone has something, probably significantly more than the current system provides, but individual savings and retirement plans, both company sponsored and personally funded, will be encouraged by new IRS policy. No retirement income, regardless of source will be subject to income taxation. Neither employers nor self-employed persons will be required to make matching contributions of any kind to employee SSRIAs. However, they will be encouraged to use their improved cash flow to increase employment or to reduce prices, perhaps by a new system that will reduce their corporate income tax obligations as a reward for boosting the economy. Similarly, billions of dollars of discretionary spendable income will find its way back into the economy from consumers whose payroll deductions have been slashed deservedly.

Two other thoughts: (1) All government employees at all levels, elected, appointed, or hired, would be moved into the new system. (2) SSRIAs would be available to all non-payroll and/or voluntarily unemployed American citizens.

Change is good; keeping change this simple is even better.

Normal 0

Article – One Farmers Insurance Agents Experience Working for Farmers.

Copyright 2008 by Mr. Pickles

All rights reserved, including the right of reproduction in whole or in part in any form.

Right now you are debating whether to start a career with Farmers Insurance. You are so excited at the thought of owning your own business. What a wonderful opportunity. How can you start up your own business in America for almost no money? Your District Manager has told you and shown you that there is no better opportunity in America than a Farmers Insurance Agency to develop your own small business. And they will pay you a subsidy of up to $1,500 per month for expenses. What an amazing deal!

Please keep an open mind, and read for yourself what a former Agent of two years has to say about Farmers. At the end of this article I have links to documentation showing that I exceeded my quotas, was a hard working, successful Agent, and still ended up being let go from Farmers Insurance.

The Farmers group of company’s are actually a pyramid scheme, or Ponzi scheme, where only the District Managers and the heads of the company make money, the Agents just get knocked down, and I’ll explain to you how this happens.

Of course, their are a few Agents in each District that are successful and are making the six figures that your District Manager is promising that you will make, but these agents are only ‘show pieces’. Nine out of ten Agents work 18 hour days, sign up their network of friends and family, cold call for new business, then are eventually rooted out, having their clients that they brought to Farmers given to those few successful ’show piece’ Agents, and the rest to the company itself (the District Managers). This is so the company does not have to pay the commissions to the Agents. This way the Farmers Company makes more money.

I’m sure your District Manager has told you, “after the first year, you’ll earn between $35-$50k, then it doubles after that, and then you’ll hit six figures after two or three years. After two or three years, you’ll be earning six figures, or close to it on renewals alone.” Please listen to me when I say that this is complete B.S.

Farmer’s requires that in order for you to convert from a ‘reserve agent’ to a ‘career agent’ that you sign up 30 or 40 clients (depending on your contract). These 30 or 40 clients are typically your friends and family, because they are the easiest people to persuade to sign up. Then once you turn to a career agent, you are told that the World can be yours. This is where the pyramid scheme begins.

For me, within three months, I had converted to a career agent and was doing great. I had brought in over $125,000 in New Business Premium to Farmers. Within’ six months I had brought in over $225,000 in NBP. I put 75 hours per week into my agency, and at the suggestion of my District Manager, I poured my life savings into my agency. The District Manager said that for every dollar I spent on marketing, I would get two dollars back with the Return On the Investment that I would be getting. Needless to say that this ROI was not true, and now I am broke and on the brink of declaring bankruptcy.

Just see how your District Manager reacts when you ask them about the ‘running to daylight numbers’ that you have to make. This quota is virtually impossible to hit, and if you don’t hit it, you owe back all of the subsidy that Farmers gave you! Farmers is a pyramid scheme because they get the business of your 30 or 40 friends and family that you signed up, then slowly squeeze the life out of you until you end up broke and have to pay them back.

I’m not just some dead beat who couldn’t hack it. As I stated previously, I have documented, proven track record of my sales. Farmers sets their agents up to fail. This way they make more money, because they don’t have to pay commission to the Agent. The only ones who get rich are the District Managers and the executives in the company such as Tom Hopkins.

Don’t walk away from becoming a Farmers Insurance Agent, RUN AWAY AS FAST AS YOU CAN. I swear in the end you will make more money flipping burgers at McDonalds.

I spent $2,000 per month on advertising at the suggestion of my District Manager, I hit my sales quotas and now I’m in debt to Farmers for over $6,000, and I brought in over a $250,000 in premium to them. In the end, I spent over $18,000 on trying to grow my agency, and now I owe Farmers $6,000! I think you would agree that this is not a ‘wonderful’ opportunity.

If you don’t believe me, click on this link below, and read testimonies of the thousands of former & current Farmers agents. This link connects you to the United Farmers Agents Association. Look around this forum. You’ll see what I’m talking about. Save yourself, your relationship with your family and your sanity and don’t join Farmers Insurance.

Here is the link to the United Farmers Agents Association. http://www.ufaa.com/phorum/read.php?1,1685

Here is the link to documentation that shows that did in fact hit my quotas and actually won a few awards for the amount of production that I brought in.

Http://www.farmerssacramento.com

If you would like to read further, please purchase my book about how my debt, family problems due to the amount of time and energy I put into my agency, and the loss of my agency has lead me to thoughts of suicide. This book is NOT just for Insurance Agents. This book will help any small business owner who’s business has failed. You can find my book here:

It will be published within the next few months. It will cost $9.99 and $14.99. I am not sure yet on a set price. Please leave me a message on Articlebase, or email me at nibnub@gmail.com to pre-order your book. Thank you for your support. You will find comfort in this book, and this book will console you and be your support group that you can turn to each and every day.

This may be a good time to rethink the types of life insurance policies you should buy. Until the market settles down many people don’t want to be spending a lot of money. Everyone is looking for a safe place to put their money. We see some stocks, like Wachovia, slide then rise again. Others may take a longer time before they are again viable.

What of life insurance though? Which types of life insurance policies should we buy?

Term life insurance requires very little premium outlay and, for some, may be a good idea. Why would one want to put out money for the higher premium permanent policies at this time. You get the same death benefit with term insurance as as you would with the more costly universal life, variable universal life and whole life policies. You have a variety of term policies to choose from.

Yearly Renewable Term

This policy has a premium that increases every year so you would likely want to keep it for a very short period of time. The premium is very low, initially. The death benefit is level throughout.

Decreasing Term

This is a policy that is more often than not used to pay off a mortgage balance upon the death of the insured. The death benefit decreases with the mortgage balance and the premium is level throughout.

5 Year Term

If you are uncertain what type of life insurance policy you should buy you probably should take out a 5 year term policy now and convert to a permanent policy later on.

Other Level Term Policies

The 10 year term, 15 year term, 20 year term, 25 year term or 30 year term may be best for you now. You will have quite a while to think where you go from here. Your family, or business, will be protected meanwhile.

Permanent Policies

During a past recession I saw something I considered quite strange at the time. People were putting large sums of money in annuities but they also put considerable sums in single premium, limited payment and regular whole life policies. At that time I was with the Northwestern Mutual Life Insurance Company, Now Northwestern Mutual Financial Network. When I asked why they said that they were not looking to make any big profit. They wanted safety and they knew the reputation of that company. They felt they would not loose their money. They were right.

There are other companies that you can feel safe with. Check out their performance with the A. M. Best company. There are also what may be arguably better types of life insurance policies to safely put your money in. I refer to the universal and the variable universal life policies. If you choose to do this, however, you should make it your responsibility to check out the performance history of the company and how well they do with these policies.

When everything settles down again some people will choose to switch to a term policy and invest your money in mutual funds or probably a money market plan.

There comes a time in everyone’s life when some sort of financial aid is needed. These situations become very hard to get through for most people, simply because financial education is not something we are often thought at school or home. There are several financial instruments available which can help us get out of these financial meltdowns.

The kind of financial instrument we use depends on our situation, some will need a greater amount of money because they are property owners, some will need less because they live in an apartment, others have an extra car which needs maintenance, etc. So for most of these situations we usually turn to banks to lend us a hand through personal loans, credit cards or lines of credit, etc.

But what happens when the banks won’t lend us the funds we desperately need?. At this point we are desperate for a solution and the fact is that there are many of them. We will proceed to list some of them as follows:

Payday Loans: This particular instrument has bailed out of trouble so many people that businesses have based their services around this concept. Payday loans are, as the name implies, loans which are given after the applicant has provided certain information such as the name and phone number of the company were he/she is employed, a checking account number (to deposit the funds), some may ask for social security, etc. This type of loan is expected to be paid within 10-15 days when the next paycheck is received. Some may extend this period to 20 days or even a month. Payday Advance Loans are normally used to cover daily expenses and payments which need to be taken care of immediately.

Settlement Loans: People who have had accidents while working, etc. often incur in significant and unexpected expenses throughout the litigation process. In order for the plaintiff to remain financially solvent he/she may use a settlement loan to cover medical bills, court fees, rent, private investigators, lost wages, etc. This instrument is often provided by underwriters and insurance companies.

Annuity Cash-outs: Annuities work very similarly to Certificate of Deposit Accounts (CDs) in other words, funds are first paid to a financial institution such as a bank or an insurance company so that the money invested may grow at either fixed or variable rates which are usually tax-deferred during the accrual process. This instrument can also be cashed out to cover expenses.

As you see these options are available to everyone depending on the situation. The bottom line is to realize that there always are options regardless of the bank’s willingness to lend the funds.

There are several ways to squeeze more income out of a given amount of capital invested in a CD. Let me share with you the split annuity concept.

Here is an example typical of many people. Mary is 75. She is a conservative investor. She has to be because she has a limited amount of capital. On the one hand, she has to play it safe; on the other hand she needs to get as much income out of her assets as she can.

She has a $100,000 5 year CD down at the bank. It is paying 4.87% interest a year. Given her objectives of earning the most she can, not taking any risk of losing the principal and her concern for the fact that prices at the grocery store keep going up, she has at least two problems.

The first is the fact that the interest on her CD is taxable. In her 15% bracket, 4.87% nets out to 4.14%. Second, her $100,000 is not growing, so her income is not keeping up with the increases in the cost of living.

Can Mary do better?

Most likely she can. She can increase her after tax spendable income without risking her principal pretty easily. She might even be able to increase her $100,000 over time to boot. One of the ways is by using a split annuity.

The concept behind a split annuity is simple. Mary transfers her CD to an insurance company’s split annuity contract. The $100,000 is split into two accounts. The first is an immediate annuity. This pays Mary a monthly income. The balance of the $100,000 is put into a deferred annuity which grows at interest.

Let’s take a look at each of these accounts in more detail.

The advantage of the immediate annuity portion is that it can pay Mary a higher income that her CD. Second, unlike her CD, which is all taxed, Mary will pay no tax on a percentage of the income produced by the immediate annuity portion of the split annuity. Assuming a ten year payout, the amount excluded from tax could exceed 80%.

The benefit of the deferred annuity portion is that it grows tax-deferred. This part of the split annuity is designed to grow the total account back to the original $100,000 at the end of the chosen time frame. The net result is more income for Mary without increasing her risk.

That is the basic premise of a split annuity. This assumes using one insurance company’s product: a self-contained split annuity contract.

However, my experience is that you can do better if you use two insurance companies. By shopping around, you can find an immediate annuity that pays more than the immediate annuity portion of a single split annuity policy. Similarly, you usually can find a deferred annuity that pays more than the deferred annuity portion of a standalone split annuity contract. So don’t just stop with having your financial planner go grab a split annuity off the shelf. Have him or her find the most competitive immediate annuity and the most competitive deferred annuity and “make your own” split annuity.

The other advantage of using two products is that some companies offer what’s called a “bonus” annuity. To attract your business, they will give you a bonus for moving your money over to them. The amount is a function of interest rates and the length of the deferred annuity; in general, it can range from 5% to 10%. But the key is that the bonus is paid up front, so you earn interest on both the money you put into the deferred annuity and the bonus right from the get go.

As you have seen above, the plain vanilla split annuity is designed to have you wind up with the same amount of money you started with, but with more spendable income during the annuity time frame. Using a two insurance company approach and a bonus annuity, you could end up with more spendable income and more money. Put these two facts together and it makes the split annuity approach even more attractive.

But can we do even better for Mary? Possibly, yes, if she is willing to take a modest risk.

This alternative would place the deferred annuity portion into an equity indexed annuity. This is a subject all to itself, but let me simplify the definition of an equity indexed annuity by saying that it is an annuity where interest is credited according to the performance of one of the major stock indexes, such as the S&P 500. The annuity can only go up; it cannot go down. If the S&P 500, for example, goes up, the account goes up. If the S&P goes down, the account stays the same. There are some equity indexed annuities that also pay a bonus up front.

If Mary were to choose this alternative, she might be able to end up with an account that is worth more than her original $100,000 at the end of whatever time frame she chooses.

I hope you take away at least two points from this article. First, for the many people who are in Mary’s situation (own a CD and need more income), investigating how a split annuity might produce more income would be a smart move.

Second, there are a lot of variables that have an effect on whether or not a split annuity is the best solution.

That’s why there are financial planners. Sit down with one; explain your situation and objectives. Maybe a split annuity will fit the bill.