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Annuities

 - Types of Annuities

 - The Different Phases of an
    Annuity

 - Fees, Expenses and Bonuses
    to Watch For

 - Sub Accounts

 - 1035 Exchanges

 

 


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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