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Colleen King - Blogs


Taxes on annuity earnings? Are you kidding me?

02-27-2010 by Colleen King

Why is an ‘insurance person’ writing about a tax issue? When it comes to annuities, it may end up connected if the President has his way. Unfortunately.

An article in Investment News by Dan Jamieson on February 22 indicates that President Obama wants to have the 2.9% Medicare tax apply now to unearned income. This will hit more than just annuities, this will also affect other forms of unearned income you may be more familiar with–dividends, rents, royalties and interest on individuals earning more than $200,000 and couples earning more than $250,000.

Is nothing sacred? Annuities, particularly fixed or indexed annuities, are a good way for people to go when looking for a conservative option to put money away. I’m assuming that if you are using an annuity for an IRA of some sort this wouldn’t apply. One reason many financial planners don’t use annuities for IRAs is the presumption that the fees and restrictions associated with annuities aren’t worth it. (There are many with no fees, by the way.) But there are fees generally with most options, aren’t there? Trading fees, etc?

Money in an annuity currently grows tax deferred, whether it’s set up as an IRA or not. This money needs to sit and grow particularly for folks planning on using this for retirement living. If they are a high wage earner now, this can eat into the growth of a non IRA annuity.

Share this with a friend, not just the annuity part, because people need to know what else is going to be affected by this proposal. Seems like someone needs to look at ways to cut spending, but maybe there’s just something I’m missing. more

Category: Annuities

Insurance? Not today

12-31-2008 by Colleen King

Health Insurance, life insurance, annuities, long term care insurance–okay, my usual topics are in. But today’s article is not to talk about insurance, I just want to wish everyone a Happy New Year.

2008 was a lousy year for many people, so kick it to the curb and get ready for 2009. As far as insurance, we’ll see what actually changes in the health care arena. It won’t be fast or ‘all curing’ but I hope there will be some positive action. 

Especially if it doesn’t mean me losing my source of income! 

So, I wish you all a Happy NYE, and we’ll be ringing it in from the Caribbean. Hope that bodes well for smoother sailing in 2009! I look forward to answering your questions again…..

Be well! more

Category: Annuities

I refuse to participate in the recession.

10-09-2008 by Colleen King

I recently heard this statement at a sales training session, and it’s become my new mantra. Health insurance and most other types of insurance for that matter, can be really expensive and now’s not the time to be absorbing rate increases.

Even though I sell insurance for a living I don’t like to see people pay more than they need to. That doesn’t mean the least expensive coverage is the best way to go either. But there is a happy medium often times.

Life insurance rates overall have come down over the past few years so if you purchased life insurance more than 4-5 years ago, it might be time to see if there is something less expensive for you. Why not? You also have to see if what you have is sufficient. If you’ve had another child or two since you last bought a policy, it’s time to make sure that is still okay.

Long Term Care insurance–well, none of us are getting any younger, so if you are in your late 40s and up, you might consider at least learning about it. Maybe get a quote too. The old thinking was that this is something you buy in your late 60s, early 70s. By then, rates can be at least double what they would be in your 50s. Plus there’s the risk of developing a health condition that could either keep you from getting a 10% preferred health discount or rendering you uninsurable in general.

Annuities–see my September 30th post on annuities. They can be a great move in this economy if you don’t need the money right away and there aren’t enough antacids in your house to withstand the stock market volatility.

So don’t participate in the recession. If you are a business owner, you still need to market. Those that stop, their businesses don’t grow. You might not grow as much, but growth of any kind is good right now.

Be Well! more

Category: Annuities

What about Annuities in this crazy time?

09-30-2008 by Colleen King

Can it get much crazier? If you’ve never considered an annuity for anything before, you should consider it now.

An annuity is actually an insurance product that gives people a guarantee on their investment. At least the fixed annuities and fixed indexed annuities do. The stock market is a scary place to have your money these days, especially if you saw the Dow drop nearly 800 points Monday! It didn’t plummet that much after 9/11, which doesn’t make me feel very good.

Annuities are life insurance products that guarantee your principal. Fixed annuities will make the commitment.  The variable annuities won’t, as they are directly invested in the stock market. If you are in your 20s and 30s, you may not mind the loss because you have time to make the money again or wait for the market to rebound. Not that it did after the mess of 2000, but it could.

But if you are in your 40s and up, we baby boomers aren’t going to have the time to re-save. I’ve moved a good part of my money into annuities over the past 3-4 years. There are different kinds, with different time frames, it is not a one size fits all product. Talk to your insurance or financial advisor to see if this if an annuity might be a suitable direction for you to go.  I use them for people that have left jobs and don’t want to leave their 401k or 403b behind. But they don’t have the stomach for the stock market. The other plus on this is that when you leave an employer sponsored retirement plan is that you will be starting an IRA. The main reason to move your old retirement plan is that if something happens to you, ODDS ARE THAT YOUR BENEFICIARIES WILL GET THE ENTIRE AMOUNT AT ONCE! Talk about ugly tax consequences.

By moving it into an IRA, whatever the vehicle, an annuity or whatever, you and your beneficiaries retain control and the money can be taken out over time. This is referred to as a ‘stretch’ IRA and you need to know about this.

If you are concerned about the stability of insurance companies, especially after AIG being ‘bailed’ out, or rescued, or ‘whatevered’, what you need to realize is that the insurance segments of AIG are sound. There are reserve requirements of 103% of the face value of policies that must be held, not flying around. What got them in trouble was poor investing by their other business units.  Remember, in 1929, the banks went under. The insurance companies held strong.

So take a deep breath and hang on. It’s going to be a bumpy ride! more

Category: Annuities

Annuities and the beauty of tax deferred growth

08-05-2008 by Colleen King

Annuities are a tool that allow money to grow on a tax deferred basis. Not tax free, tax deferred. Tax deferred growth is the benefit of retirement plans, whether you are looking at an employer plan such as a 401k or 403b, or an IRA you start yourself. The idea is that you let this money grow, and when you are ready for retirement, either you won’t be working or you won’t be working as much, so your income drops, ergo your tax liability drops. Here is a link to a really nice simple chart (just the kind I like) that will show you the type of growth you stand to gain.

Annuities and tax deferral

Fixed annuities, whether a regular fixed or a fixed indexed annuity, allow your money to grow on a tax deferred basis, but does NOT have to be set up as an IRA. A lot of advisers used to tell people not to used an annuity as a personal retirement vehicle for IRAs because of fees that were often associated with them, and frankly because there was more money to be made for them if you went into a stock based account.

Well, since the stock market has become so volatile, a lot of people are looking to some kind of a fixed annuity because with these, unlike the stock market or the majority of variable annuities, your principle is guaranteed. Once you hit a certain age in life, you don’t want to risk losing what you have saved and try to rebuild it again.

When planning for retirement most experts will tell you to take advantage of all the ‘pre-tax’ options available. Once you max those out, but you still have excess money you would like to put away, you can either look at a Roth IRA or an annuity. The advantage of a Roth is that you are putting away after tax money so when you pull money out of it, your gains are tax free. The potential disadvantages are the annual limits on what you can deposit and if your income is above a certain amount you aren’t eligible to have a Roth. That still leaves you with annuities as an option. No limits on how much you can put in, your financial status doesn’t come into play so it’s one of those things to consider. Especially if you have some windfall bonus, inheritance or some other good fortune come you way.

So there is a combination of ways to do this, you just need to assess the best prospects! Be Well! more

Category: Annuities

Annuities–what are they, and why should I consider having one?

07-13-2008 by Colleen King

Annuities can be a good things for a lot of people depending on their retirement status, financial situation and age. There are essentially two categories–fixed and variable. In the fixed category, you have the regular old fixed annuity and fixed indexed annuities.

Variable annuities I’ll touch on briefly–only briefly because I don’t sell them, but want to share with you what they are. Variable annuities are directly invested in the stock market. The advantage of these that are touted is that when the market goes up there is big money to be made. But if things go down, your principle isn’t guaranteed. There are riders that can be purchased to help safeguard against this but obviously, if you are purchasing them, it eats into your profit potentially. Not going to spend a lot more time on this, again because I don’t sell them. If you’re interested though I’d be glad to refer you to reputable agents that will give you good advice. They may be good for your situation, most certainly.

On the fixed side, the plain ole vanilla fixed annuity is what your parents and grandparent would be well versed in. Your principle is guaranteed! You accumulated a large amount of money, $100,000+, bought an annuity from an insurance company, and you were guaranteed an income for life. You would get monthly payments for life, and the amount per month would be based on the amount you deposited and your life expectancy. Annuities are sold as a source of income you can’t outlive. What makes this different from one other particular product, there’s a bad old insurance saying that explains it–life insurance is in case you die too soon, and annuities are in case you live too long.

You can now find fixed annuities for lower opening amounts, most of them have no associated expenses. Deposit it, let it grow, and as you approach ‘the golden years,’ your nest egg will help provide for you. The ways payouts can be calculated has changed a lot too, defeating a lot of the complaints and concerns from days gone by–especially from beneficiaries when their benefactor died not long after opening an annuity.

Fixed indexed annuities are a little more adventurous. But like all fixed annuities, your principle is guaranteed. In this case, you have multiple ways to allocate your money. Your gains and losses are tied to different stock market indices, but not directly invested in the stock market. Sounds like a contradiction in terms, but trust me, it works. If the market goes up, depending on the crediting strategy you select, you value goes up. But if the market plummets, you don’t lose, your balance stays the same. Another bad old insurance-ism, ‘Zero is the Hero.’ Good market things go up, bad market, you stay the same, your balance doesn’t drop.

Recently, due to a popular NBC television show, Fixed Indexed Annuities and the agents selling them were branded as being deceptive and a bad thing to put money into. While Chris Hanson was able to point all the bad, he apparently passed on the option to present any of the positives. Love you Chris, but I was disappointed in how lopsided your show was. They are a safe product to put your money into, but there will always be the loser agent that will be more interested in their commissions rather than finding a suitable vehicle for their clients. The way you lose money in a fixed indexed annuity is by pulling too much money out of the policy too soon, thus incurring the wrath of the surrender charges. But more on that in a future post.

So, if you are looking for a safe vehicle to plan for retirement, or you have left a job and want to figure out what to do with your old 401k or 403b, consider an annuity. If you’re in your late 40s or up, this can be a safe place to plop that nest egg. You can also consider a stock account, mutual funds or things like that, but be sure to ask what kind of guarantees on your principle they will make. I’ve got two indexed annuities, and I’ve sold some to family members. Believe me, as most will know when you do business with family, you better have the strength of your convictions behind what you offer them! more

Category: Annuities