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OPEN AN ANNUITY ACCOUNT

Which type of annuity are you interested in:

Fixed Rate Deferred Annuities

• Low-risk, long-term investment
• Tax deferred earnings for compounded growth
• Principal guaranteed by the insurance company*

Equity Indexed Annuities

• Potential higher returns based on stock market index
• Tax deferred earnings for compounded growth
• Principal guaranteed by the insurance company*

Fixed Rate Immediate Annuities

• Secure, monthly income for your retirement
• Choice of payout terms, including income for life
• Steady, guaranteed interest rate

* Guarantee based on the claims-paying ability of the issuing insurance company.

About Annuities

An annuity can be a solid part of your financial plan, whether you’re a high-risk or a conservative investor. Annuities can help you build a comfortable, secure retirement, or provide you with an immediate, guaranteed source of income for as long as you wish. They can protect you from unexpected drops in the stock market and guarantee that your interest rate never falls below a certain minimum.

An annuity is a contract between you, an annuity owner and an insurance company. They can be purchased with a single lump sum or receive regular contributions over time. Your lump sum payment can be made from existing savings, IRA funds, an inheritance or a 401(k). Unlike other investment alternatives such as certificate of deposits (CD), you can usually withdraw some percentage of your annuity fund every year without paying a surrender penalty. This is called a penalty-free withdrawal and guidelines vary depending upon the plan you choose.

Deferred Annuities

Deferred Annuities are an ideal way to create a retirement dream fund, a secure foundation for your future. A Deferred Annuity enables you to accumulate tax-deferred interest over time. Though you pay tax on the interest when its withdrawn, there are different ways to calculate your interest depending upon the type of Deferred Annuity you buy. You control when and how to withdraw your money.

Equity-indexed Annuities

A flexible-premium equity-indexed annuity – the way to beat inflation

You know Social Security and pension plans alone will probably not generate enough income to beat the rising cost of living in your retirement years. The key to beating inflation and generating the income you’ll need is long-term, diversified financial planning. And harnessing the power of higher interest rates linked, in part, to increases in the Standard & Poor’s 500 Composite Price Index (S&P 500 Index). Since 1975 the S&P 500 Index has averaged an annual increase of more than 11%* - outpacing the rate of inflation.

Equity-indexed annuity helps you build a more secure financial future by combining the safety and guarantees of an annuity with the upside potential of earning interest rates linked to a portion of the increases in the S&P 500 Index. Typically, 90% of your premium (accumulated at 3% interest) is guaranteed, though it varies among plans. Some plans have a maximum interest rate, but the amount of additional interest you earn can range from 0 to 100%, depending upon the stock market index and your annuity’s crediting period.

Though they contain more risk, Equity-indexed Annuities provide a chance to earn higher interest rates than a Fixed-rate Annuity.

* S&P 500 Index without dividends since 1/1/75 through 12/31/95. Includes some years with negative returns.

Fixed-rate Annuities

Fixed-rate Annuities are a low-risk product. They offer an initial interest rate for a specified period of time, usually ranging from one to ten years. After that time, you earn interest at a rate determined by the company, though that rate is guaranteed to never fall below the minimum (usually 3 to 4%) stated in your contract. The company may declare the adjusted rate for one year, or longer for plans with a Market Value Adjustment.

Fixed-rate Annuities generally guarantee return of your principal. They provide an initial guaranteed interest rate and minimum guarantee thereafter. Renewal rates have historically exceeded the minimum interest stated in policies.

Variable Annuities

A variable annuity is a type of annuity in which you decide how your money will be invested. You can invest your annuity funds in a number of investment types, such as bond funds, money market funds, stock funds or guaranteed interest accounts, and you can transfer money between funds, tax-free. The rate of return on your variable annuity depends on the investments you choose, and your funds are subject to the same risks as any other stock market investments. However, your variable annuity does offer the advantage of tax-deferred earnings and there is a death benefit feature that guarantees the amount of your contributions will be paid to your beneficiaries, should you die before you begin to withdraw money from your variable annuity.

Because variable annuities tend to be higher risk, they are more often used to accumulate funds for retirement, although they can be purchased as an immediate annuity and used for the payout phase. In that case, the payout will depend on the return of the investment and can vary from month to month.

Choosing An Annuity

As with any financial decision, choosing an annuity means making tradeoffs. For example, the fixed-rate deferred annuity that offers the highest interest rate may only credit that rate for one year. However, an annuity with a lower initial interest rate may credit it for ten years. Interest rates, length of any guarantee period, and other features often widely vary. Each deferred fixed-rate annuity offers you a different set of terms, so you are likely to find a plan to meet your personal needs. When shopping for an annuity, Questions to Ask Before You Decide:

• What will the interest rate be?

The initial interest rate is the rate your money earns from the day the insurance company receives your first premium until the end of a specified period, which varies by contract. The initial interest rate period is, not surprisingly, the length of time during which you will earn the initial interest rate.

Compare plans to find the right balance of factors for your needs. You might want a plan with a higher initial interest rate, even if you will earn that rate for a shorter period of time. Perhaps you prefer a plan with a longer initial interest rate period, even if it pays a lower initial interest rate. You may want to take a slightly lower initial interest rate in order to have a lower surrender penalty. The more lenient surrender penalties, the greater flexibility you will have to withdraw funds. Your individual situation and personal retirement goals will determine the relative value of these factors.

• Do I want to contribute qualified or non-qualified funds to my annuity?

Qualified funds are funds on which you have not yet paid income tax. For example, a traditional Individual Retirement Account (IRA) is purchased with qualified funds. Other funds, such as contributions to a 401(k) plan and pension or profit sharing plans, are also qualified funds.

If you are just starting a traditional IRA, you may want to think about using a qualified flexible premium deferred annuity. If you are dissatisfied with your current IRA, it’s easy to roll over your existing IRA funds into a new qualified deferred annuity.

If you change employers, don’t pay tax penalties by cashing in your 401(k) or other pension benefits; Put those funds into a qualified deferred annuity of your choice.

Non-qualified funds are funds that have already been taxed, such as regular wages or salary. The amount of qualified funds you can save each year is limited, but the amount you can contribute to non-qualified annuities is unlimited.

To achieve your retirement dreams, consider establishing a non-qualified deferred annuity.

• How much do I want to contribute to the annuity?

The amount you contribute depends on two main factors:

1. How much money you can put in, both now and in the future.
2. How much money you ultimately want to take out.

Only put money into a deferred annuity that you do not expect to need until you retire, barring a major emergency. Remember that there will be taxes and possibly other penalties for early withdrawal (before you are 59+). Obviously, the more money you put in, the more you will get out. Only you can determine how much you want to save today in order to fulfill your dreams in the future.

• How frequently do I want to contribute to the annuity?

You have two options for contributing premiums to your annuity: single premium or flexible premium.

Single Premium means that you establish your annuity contract with one contribution (called a premium). You cannot make additional contributions to that annuity, but you can purchase additional annuities.

Flexible Premium means that you can contribute additional premiums after your initial premium. As long as you contribute at least the minimum amount defined in your contract, you can usually make these contributions at any time for any amount. The flexible premium may be ideal if you want to make regular additions to your contract, much like adding to a savings account.

• When do I want my benefits to start?

Your benefit payments can start on just about any date within twelve months of the date you purchase your annuity. Normally, the insurance company needs at least four weeks to process your application and set up the benefit payments. When you buy a deferred annuity, you put off – defer – your benefits until a future date of your choice.

You may want to put off receiving benefits until you are in a lower tax bracket – perhaps after retirement. At this time, you can cash out your annuity for a lump sum, and use some or all of this amount to ensure that you have an income for life, by buying an immediate annuity. To avoid paying tax on the funds you use to buy an immediate annuity, you need to do a Section 1035 (a) Exchange. Please call a licensed financial advisor for assistance. You may also annuitize your deferred annuity with your existing insurance company (convert it into an immediate annuity).

Please note: Qualified annuities require you to start taking the minimum required distribution from your annuity by April of the calendar year following the one that you reach age 70+, or the calendar year in which you retire, whichever date is later.

• How frequently do I want to receive my benefit check?

You can receive your benefit checks once a month, once a quarter, twice a year or once a year. Most people decide to receive their benefit checks once a month, provided that the amount of the check they will receive exceeds the minimum payout level established by the insurance company. The usual minimum is $100. The benefit payment can be made by check, and be payable to whomever the owner has designated. If desired, the benefit checks can also be deposited directly into a bank account.

• What if I want to take my money out before the end of the surrender penalty period?

Most plans allow a penalty-free withdrawal of up to 10% of the premium or annuity’s value, once a year. There is no surrender penalty on these withdrawals. However, if you want to take out more than the penalty-free withdrawal amount or more than one withdrawal in a given year, you may be subject to a surrender penalty. The surrender penalty period is the length of time during which surrender penalties are charged.

The penalties or fees the insurance company charges on surrender during the penalty period are usually a percentage of the amount you withdraw in excess of the penalty-free withdrawal amount. Terms for these penalties widely vary from plan to plan. You could also be liable for taxes and a 10% tax penalty that the IRS imposes on funds withdrawn before you are 59+.

In certain situations, surrender penalties may be waived.

• Do I want to receive benefits for life?

Some immediate annuities have a period certain or guaranteed-payment period, which is a specific length of time during which benefit payments will be made. While you can choose a guaranteed period for your plan, most annuities are paid for the lifetime of the annuitant. Unless the owner provides for guaranteed payments for a certain period by adding a “period certain” clause to the life-only annuity, payments stop when the annuitant dies.

• What benefits do I want paid to my spouse if I die first?

Although a lifetime annuity on only one annuitant generates the highest regular benefit payment, most married couples want the annuity payments to the surviving spouse to continue after the first death. In order to do this, they name themselves joint annuitants. After one of the annuitants dies, the annuity benefits can continue at the same level or at a reduced level to the surviving annuitant.

When establishing the annuity, some owners stipulate that the benefits decrease by a certain percentage after the first death. This increases the benefit while both are alive and recognizes that one can live more cheaply than two. For example, instead of a level $1,000 per month while one or both annuitants are alive, they can possibly receive $1,200 per month while both are alive and $700 per month, thereafter.

• When does the contract end?

Many deferred annuity contracts have no predetermined end. They continue until you decide to begin withdrawing funds. Some annuities, however, specify a maturity date, such as age 85 or 90. Your money, along with the interest you have earned through triple compounding, continues to grow until you decide to take it out, or until the contract matures; at which time you have several options.

You may choose to cash out the entire annuity at once. This is called surrendering the annuity. Or you can set up regular benefit payments for whatever period of time you wish. This is called annuitizing the annuity. You may also arrange for another person to receive the annuity proceeds after you die.

The regulations for qualified plans dictate that you start receiving a minimum distribution by April of the calendar year following the one that you reach age 70+, or the calendar year in which you retire, whichever date is later.

Is a Deferred Annuity Right for you?

If you are considering a Deferred Annuity Investment, ask yourself these questions:

• Are you employed and accumulating money to meet your long-term retirement needs?
• Are you leaving, or planning to leave your job, and looking for a tax-deferred plan to which you can roll over your 401(k) or other profit sharing funds?
• Do you have at least five years to let your money grow before you need to withdraw it?
• Do you have at least $2,000 available in any account including savings, an IRA or a KEOGH?
• Do you understand the risk level involved with buying each type of annuity? Are you comfortable with those risks?
• Do you want to put off paying income tax on your interest earnings for as long as possible?
• Have you contributed all you can to qualified retirement plans, such as your 401(k)?

If you answered “yes” to most of these questions, consider purchasing a deferred annuity.

How does a deferred annuity work?

You pay one or more premiums to an insurance company. Your premiums earn interest, which can be calculated in several ways, depending on the plan you choose. A contract that only allows on premium is called a Single Premium Deferred Annuity. A Flexible Premium Deferred Annuity allows you to pay additional premiums at a later date.

Usually 100% of your premium is placed in an account and earns interest. Unlike many mutual funds there are usually no initial fees deducted from your contribution.

You can withdraw the funds from your account whenever you want in one or more lump sums. Withdrawals may be subject to surrender penalties (usually in the first five to ten years). Withdrawals before age 59 ½ are usually subject to an additional 10% tax penalty.

What is the difference between the “annuitant” and the “owner” of a deferred annuitant contract?

The owner purchases the annuity and designates the annuitant. The owner has authority over the contract and is responsible for any taxes due on withdrawals.

The annuitant is the person upon whose life the annuity is based.

If the annuity was purchased with qualified funds, the annuitant must also be the owner. Under a qualified annuity, if the annuitant (also the owner) dies, the death benefit is payable to the beneficiary.

If the annuity was purchased with non-qualified funds, the annuitant does not have to be the owner. Under a non-qualified annuity, if the annuitant dies, and there is a contingent annuitant, then the contract usually continues. Under many contracts, if the annuitant dies and there is no contingent annuitant, the death benefit is payable to the beneficiary. On some contracts, where the death benefit is only payable on death of the owner, the contract will continue with a new annuitant as determined according to the contract.

What is the difference between a single premium and a flexible premium deferred annuity?

“Single premium” means that one premium contribution is used to purchase the annuity contract. If you want to make additional premium contributions, you need to purchase a new contract, as you cannot add them to your existing policy.

“Flexible premium” contracts allow you to make additional contributions to the existing contract. Depending on the contract, additional contributions may be as low as $50.

You can usually make these contributions at any time and for any amount, subject to a minimum amount defined in your contract. The flexible premium choice may be ideal if you want to make smaller, regular additions to your contract, much like adding to a savings account.

If I buy an annuity myself, and then decide that I want someone else (may be my new spouse0 to become the co-owner, can I split the ownership after the annuity has already been established?

On a qualified plan, you have to be the owner and annuitant, and cannot have a co-owner. On a non-qualified plan, you can change the ownership but this may have tax consequences if the new co-owner is someone other than your spouse.

What’s the difference between the initial interest rate and the initial interest rate period?

The initial interest rate is the rate at which your premiums will earn interest. The initial interest rate period is the length of time during which you will earn that rate.

What does “contingent bonus rate” mean?

Contingent bonus rate refers to additional interest you may earn if you meet certain conditions. For example, if you continue your annuity contract for a stated length of time and then begin to withdraw your money in regular annuity payments, a higher bonus interest rate may apply. Be sure you know which interest rate applies in which situation, when you compare fixed-rate deferred annuities.

What is a “bail-out” rate?

A bail-out rate protects you if you are concerned that the company will declare a lower interest rate after the initial interest rate period is over. A policy with a bail-out rate enables you to “bail-out” of the contract without surrender penalties if the declared interest rate is less than the initial interest rate by more than a specified amount.

When you own a deferred fixed-rate annuity, your account will earn the initial interest rate for a specific period of time and then earn the interest rate declared by the company. The declared rate cannot be less than the minimum guaranteed in your contract (usually 3-4%).

For example, suppose that your initial rate is 5.4% and the bail-out rate is 4.4%. If the company lowers the interest rate below 4.4%, you can bailout. That is, you can cash out your annuity without paying the surrender penalty. This opportunity is usually limited to a 30-day period after you are advised of the new rate.

What’s a liquidity feature?

Although it sounds like a way to tell whether your Jell-O is ready to eat, a liquidity feature is actually a way in which you can take cash out of the annuity. Liquidity features might include full surrender, death benefit, partial or systematic withdrawal, and loans. A full surrender or partial withdrawal may trigger surrender penalties during the surrender penalty period. Even during the surrender penalty period, many deferred annuities allow you to make a partial withdrawal each year up to the penalty-free withdrawal amount without any penalty. In some situations such as death, terminal illness, confinement to nursing home, and so forth, the company may waive the surrender penalty.

When I am ready to withdraw my funds, can I get back all my money at once?

You can cash out your deferred annuity for a lump sum cash payment, but you may be subject to a surrender penalty for early withdrawal. You may, in addition, be subject to a tax penalty if you are less than age 59 ½.

You can also make occasional withdrawals or systematic withdrawals. If you wish, you can convert it into an immediate annuity and receive a stream of benefit payments.

How do surrender penalties work?

One hundred percent of your premium is usually credited to your account when you pay your premium, despite the fact that the insurance company has incurred costs in putting your contract in force. The company recovers these costs over time. The insurance company will usually charge you a surrender penalty before these costs are recovered, if you cash out your contract.

During the surrender penalty period, which usually lasts between five and ten years, you can usually withdraw some portion of your money without paying any surrender penalty. The penalty-free withdrawal amount depends on the contract, but may be up to 10% of the account value each year. If you want to withdraw more than the penalty free withdrawal amount, you will usually incur a surrender penalty.

What is a penalty-free withdrawal privilege?

During the surrender penalty period, you are often allowed to withdraw a certain amount of money every year without paying a penalty. The right to make this withdrawal is called the “penalty-free withdrawal privilege”.

The specific amount of the penalty-free withdrawal amount will vary from plan to plan. However, be aware that while the contract may not penalize you, the IRS may, unless you are over age 59 ½.

When are surrender penalties waived?

Depending on the contract you purchase, there might be circumstances in which surrender penalties might be waived.

For example,

• Some contracts may have a “bail-out rate” which assures you that if the interest rate credited on your annuity falls below a certain (usually predetermined) rate, you can cash out your contract without any surrender penalties. Normally, surrender penalties will only be waived for a limited period, such as 30 days.
• If you are confined to a nursing home or become terminally ill, some contracts will waive surrender penalties.
• You may also be able to annuitize (i.e., convert) your policy into a payout (i.e., immediate annuity) without incurring any surrender charges. The payout option available will usually be limited so that payments will continue for a minimum of five years.

Remember that contractual surrender penalties have nothing to do with IRS penalties. The government still wants you to wait until you are 59 ½ to make any withdrawals.

How do I convert my deferred annuity into an immediate annuity?

You can annuitize your deferred annuity with your existing insurance company (convert it into an immediate, or payout annuity).

You can also surrender your annuity for a lump sum, and use some or this entire sum to ensure that you have an income for life by buying an immediate annuity. To avoid paying tax on the lump sum used to buy the immediate annuity you could do a partial withdrawal leaving behind in the deferred annuity the required lump sum to make the immediate annuity purchase via a Section 1035(a) exchange.

Under a Section 1035(a) exchange you assign your deferred annuity to the insurance company, who will issue your immediate annuity. They then surrender the deferred annuity and use the surrender value they receive as the immediate annuity premium. PaulBalep representatives would be glad to help you through the details.

What is the difference between qualified and non-qualified funds?

These terms refer to the tax status of your premium contributions.

Your qualified contributions are usually deducted from your taxable income in the year your contribution is made to an IRA, 401(k) or similar tax-qualified retirement savings plan. Therefore, no income tax has been paid on these premiums. You can establish a deferred annuity for your Individual Retirement Account (IRA). You can also establish a qualified annuity by rolling over your existing qualified plan, such as an Individual Retirement Account (IRA), into a qualified annuity. You should consider this option if you change employers and have money in a 401(k) or other pension plan.

Non-qualified contributions come from the money you have paid income tax on, such as your savings, regular wages, salary, etc. Essentially, any money that isn’t qualified is non-qualified.

What is an “exchange”?

Exchanges (referred to as “Section 1035 (a) tax-free exchanges”) are tax deferred transfers of non-qualified funds.

You may transfer funds from a deferred annuity into another deferred or an immediate annuity. You can also transfer funds from a life insurance policy to a deferred or an immediate annuity. In effect, you defer tax by transferring the tax basis from the old contract to the new contract (i.e., a taxable gain of $1,000 becomes a taxable gain of $1,000 in the new contract.)

What is a “roll-over”?

These are IRS-approved methods of transferring money, on a tax-deferred basis, from an existing account 9or accounts) into another account.

Roll-overs are tax deferred transfers of qualified funds. For example, you might transfer one or more of your bank IRAs into an IRA-qualified annuity. Taxes are not paid in the year of transfer. Instead, the funds continue to grow on a tax deferred basis until such time as they are withdrawn. You can take up to a maximum of 60 days to reinvest qualified funds appropriately, although this is not generally recommended. If you take constructive receipt of the funds, there is a 20% withholding tax.

The IRS limits this type of rollover to no more than one per contract per year. As a rule, roll-overs of qualified funds are most safely effected by “Trustee to Trustee transfers,” in which the current plan makes the check payable directly to the new plan.

What does “grandfathering” mean?

“Grandfathering” means that a contract is treated according to an earlier set of regulations, even though a new set of regulations has subsequently been enacted.

With regard to annuities, “grandfathering” means that if you bought an annuity before certain tax laws were passed, you might be able to retain some of the tax benefits of the old contract – even when the annuity is exchanged for a new contract.

If you bought an annuity before 1982 and think that this possibility might apply to you, please contact PaulBalep representative and we will be glad to assist you.

How are deferred annuity withdrawals taxed?

Withdrawals from qualified annuities, such as IRAs, are fully taxable as ordinary income since your principal 9the premiums you contribute) was excluded (i.e., deducted) from your taxable income in the year your contribution was made.

For non-qualified annuities, the interest, but not your principal, is taxed when you withdraw it. Under current tax laws, you are deemed to withdraw interest before principal. An exception to this is premium paid before August 14, 1982 when principal is assumed to be withdrawn before interest.

How can I avoid paying taxes in the year of a roll-over or exchange?

To avoid paying tax in the year of a transfer or exchange, be careful to avoid taking “constructive receipt” of the funds. You can do this by having the money sent directly from the current financial instruction to the new insurance company. The easiest way to do this is to assign the old policy to the insurance company issuing your new policy. The new insurance company will then surrender the policy for you and add the proceeds to your new policy.

Tax-deferred transfers may occur between different companies (referred to as “external roll-overs” or “external exchanges”) or between different annuities within the same insurance company (“internal roll-overs” or “internal exchanges”).

Is there any way to avoid paying taxes on the annuity funds altogether?

Deferred annuities are one of the few ways remaining to legally defer taxes. However, like death, taxes are eventually unavoidable. One day the gain in your non-qualified annuity, or funds in your qualified annuity will be subject to income tax and possibly estate tax. Unless you (or your beneficiary) are in a zero tax bracket when you (or your beneficiary) receive the funds, you will have to pay tax on the funds.

Is there any way that I could get into trouble with the tax authorities because of my annuity?

As long as you pay your taxes when they are due and disclose all withdrawals, you should have no problems with the tax authorities.

After calculating the amount of income tax that I would pay when I withdraw all my money, how much money do I really save or earn by buying an annuity?

While many experts suggest deferred annuities for qualified Individual Retirement Account (IRA) funds, there are no additional tax benefits from a deferred annuity compared to other IRA vehicles. With non-qualified funds, owning a deferred annuity should mean that your money would grow faster.

For example, if you invest $10,000 at 6% interest, in 30 years you will have $57,435 in your annuity. If you then surrender it and pay tax at 28%, you will have $44,153. This is $8,588 more than the $35,565 you would have if you paid tax at 28% on the 6% interest accumulated each year, in for example, a bank account. If after 30 years you are retired and in a lower tax bracket, your gain will be even higher.

How do I make sure that after I die, my annuity payments will go to the person whom I want to receive them?

Under a qualified plan, if the owner dies, the death benefit goes to the beneficiary. If the spouse is the beneficiary, the contract may allow the spouse to request that the contract continue, with the spouse as owner and annuitant.

Under a non-qualified plan, several situations can occur depending on the particular plan.
If the annuitant dies and there is no contingent annuitant, then the death benefit may be paid.

If a co-owner dies, the contract continues unless the co-owner was also the annuitant, and there is no contingent annuitant in which case a death benefit may be payable.

If the owner dies, with a spouse as a contingent owner, or with a non-spouse contingent owner, the contract continues under the one/five rule, unless the owner was also the annuitant and there is no contingent annuitant in which case a death benefit may be payable.

Is the death benefit subject to income tax?

Yes. The beneficiary will have to include part or all of the death benefit payment in his/her taxable income. If the deferred annuity was bought with qualified funds, then all of the benefit payment will be taxable. Otherwise, only part of the payment (i.e., the interest portion) will be taxable.

How do I apply for an annuity?

First, contact a PaulBalep representative toll-free 1-800-964-8614 to discuss an annuity options. Once you’ve decided on your plan, and have a PaulBalep representative answers any questions you may have, then he/she will help you complete your application.

Is there a minimum or maximum amount I have to contribute in order to establish the annuity?

Although premium limits vary by company, the minimum initial contribution for a deferred annuity may be as low as $1,000 for qualified funds and $2,000 for non-qualified funds. The maximum range in any one policy is usually between $250,000 and $1 million.

Can I buy an annuity as a gift for someone else?

Yes. You can buy a non-qualified annuity, but not a qualified annuity. An annuity is a thoughtful and generous gift, because it demonstrates your concern for the recipient’s long-term security. An annuity may not be as pretty as flowers, but it certainly lasts a lot longer! As with any gift, remember to consider possible gift tax implications.

Is there an age limit for buying annuities? Might I be too young or too old to buy one?

In most cases, the maximum age for buying a qualified annuity is 85 years; for non-qualified annuities, the maximum is 90 years. Maximum age limits vary by company. We will only present you with plans for which you are eligible.

Generally, there is no minimum age for buying a non-qualified annuity. There is usually no age minimum for qualified annuities, either, although the owner must have taxable income that is equal to or more than the IRA contribution.

What if I move to a state where my annuity plan is not offered?

You can keep your annuity plan in force. The regulations of the state where you purchased the annuity will continue to govern the annuity. However, any state income tax that may become due on later withdrawals will be paid to your new state of residence.

What’s an annual contract fee? Do most companies charge this fee, or is it unusual?

Insurance companies need to cover the costs of administering your policy and also make a reasonable amount of profit. They do this by earning more interest by investing your account value than they credit you on your account value. A small number of contracts may in addition cover some of the costs by charging you an annual contract fee.

An annual contract fee is not always a bad thing provided that it means you earn a higher interest rate compared to a contract with no annual contract fee.
For example, on a $10,000 account value paying a $25.00 annual contract fee in advance and earning 5.26% per year is approximately the same as earning 5% per year with no fee. In both cases, you have $10,500 at the end of the year. If your account value is $20,000, you earn more with 5.26% interest, and paying the $25 fee compared to earning 5% with no fee (i.e., $1,026 as opposed to $1,000).

The description of “return of principal (premium)” makes me nervous. If I put my money into the annuity, don’t I have the right to get it back?

If you need to surrender a deferred annuity within a year or two of buying it, the surrender penalty may exceed the interest you’ve earned. In this case, you could receive back less than your premium contribution, unless your contract includes a return of premium guarantee. With a return of premium guarantee, you will always get your money back from the insurance company. Normally, you should not purchase a deferred annuity unless you expect to keep your contract in force for at least five years.


Please note that the precise coverage afforded is subject to the terms, conditions, and exclusions of the policy as issued. This explanation is intended only as a guideline. This information is not intended to be considered investment, tax or legal advice. It is provided, for your education only. This is not an annuity contract. All terms and coverages are defined solely by your policy.

For more details, please call a PaulBalep representative toll-free 1-800-964-8614 to receive a free, no-obligation proposal. Like so many satisfied clients, we think you’ll be happy you did. And to set up a meeting to discuss additional insurance and financial goals: Visit us online at www.paulbalep.com, or e-mail us at info@paulbalep.com.

“It pays to shop around with PaulBalep. Your one stop shop for insurance and financial services”

<<Independence is number one>>. We are nonexclusive producers who represent an average of eight companies-not just one. PaulBalep can evaluate and compare the products of several fine companies to find you the right combination of coverage and value.

 

 





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