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Annuities

Oftentimes, individuals think the best way to accrue revenue or increase their savings is through investing it in stocks. Though this can be true, it also can be a very risky investment, depending on the economy or events that take place that can disrupt the market, which could result in you, the investor, sustaining a loss. For example, a major recent event that shook up the market was this year’s presidential election. Although many thought the stock market would plummet, it actually rose once the results were announced. Investing in stocks can have many risks and uncertainties.

Therefore, I want to introduce to you another risk-free way of accruing your savings and making an investment for your future: annuities.

What Is an Annuity?

An annuity is a contractual financial product sold by financial institutions, like Croft Enterprises, that is designed to accept and grow funds from an individual and then upon annuitization distribute a stream of payments to the individual at a later date. Annuities provide income to individuals to have throughout their retirement years.

Annuitization is a big word that is often not known or is misunderstood by most people. Annuitization is the process of converting an annuity investment into a series of income payments.

There are great strategies and products that can be used with an annuity. Croft Enterprises is independent from the product, so we don’t have any attachment to it, and will always ensure you are receiving the most suitable annuity program for your current life situation. Many benefits come from having an annuity. For example, some products can offer you up to a 9% bonus to roll your money over to the annuity. Furthermore, investing your money in annuities is a much less risky way to save and accumulate income. Annuities can also be used for income distribution plays. Most retirees are looking for a monthly paycheck to replace what they were making when working. Many of our clients are receiving monthly payouts from their annuities for the rest of their lifes and, yes, if the client passes away, their spouse/partner will receive a death benefit from the account.

Types of Annuities:

  1. Fixed
  2. Variable universal life (VUL)
  3. Equity- indexed annuities (EIA)

Example of an Annuity:

Consider annuities if you are (a) in a high tax bracket, (b) have exhausted other forms of tax-favored retirement savings, like 401(k)s and IRAs, and (c) want to own more bonds, especially corporate bonds. You put in a lump sum — say 100K — and let it compound tax free for a while, preferably a decade. When you pull it out, profits are taxable, like ordinary income. If you make withdrawals before turning 59-1/2 you will probably also owe a tax penalty. Return guarantees are a frequent feature but are not integral to the operation of the tax game. The classic guarantee is a return of principal to your heirs if the portfolio goes down and/or you die before cashing in the annuity.

Facts about Annuities:

  1. Taxation: Annuities are taxed as LIFO (last in, first out) investments
  2. Most annuities Croft Enterprises uses have a 10% free withdrawal that will allow you to access some of your cash in case of an emergency.
  3. Some of the annuities Croft Enterprises uses offer a 145% bonus to enter into the product. This is not a “cash bonus.” It is a bonus that inflates your benefit base, which in return pays you a higher stream of income for the rest of your life.

I hope you gained some helpful information and insights into the world of annuities. Croft Enterprises is glad to answer any questions you may have. Please contact us at paul@croftenterprisesllc.com or 612-220-7692. Look forward to many more posts to come!

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