Consider the Advantages and Disadvantages of Annuities as a Financial Planning Option | Law Firm Newswire

Consider the Advantages and Disadvantages of Annuities as a Financial Planning Option

Hook Law Center (formerly Oast & Hook)

Hook Law Center (formerly Oast & Hook)

Virginia Beach, VA (Law Firm Newswire) October 9, 2015 – There are several benefits associated with purchasing an annuity, but there are also risks.

Several companies have announces that they are selling products called deferred-income annuities. This means that in return for a guaranteed paycheck for the rest of their life that starts many years later, they make a lump sum payment to an insurer.

However, one cannot usually know for sure whether it would be prudent to purchase such annuities because it is unpredictable how long one will live. Nevertheless, one can consider the purchase of the annuity to be a type of insurance policy that will provide a sense of security. It can help prevent one from outliving one’s savings. Some people may also use the annuity as a method of giving them some confidence in knowing that they are assured of part of their income.

“We provide sound investment advice, and can help our clients determine whether deferred-income annuities are an appropriate investment option for them,” said Andrew H. Hook, a Virginia elder law attorney with Hook Law Center, with offices in Virginia Beach and northern Suffolk.

Deferred-income annuities have become increasingly popular. Sales of such annuities rose from $1 billion in 2012 to $2.2 billion in 2013. The usual purchaser is approximately age 59, and plans to start collecting payments around seven years following the purchase. Although it is an expensive investment, the cost diminishes as one delays the receipt of payments.

For example, according to New York Life, if a man purchased an annuity at age 68 and started receiving monthly income of $1,000, or annual income of $12,000, the cost would be approximately $170,000. However, if he were to purchase the annuity at age 58 and delayed receipt of payments for 10 years, the cost would be approximately $100,000 for the same $12,000 in yearly income.

If he were to delay payments for 20 years, or until age 78, the cost would be under $40,000.

Deferred annuities are expensive, and the cost is what deters some people from buying them. Insurers sell options, which are frequently expensive, in order to give people reassurance about their decision to purchase deferred annuities. For example, if someone died prior to receiving payments, or sometime afterward, the annuitant’s heirs would not inherit any of the funds unless the annuitant chose a cash refund. The majority of people buy that option despite the increased cost.

Another risk is the reliance of individuals on the financial strength of the insurer for many years. However, if the insurer were to become insolvent, the guarantee association for the state would offer coverage on the basis of the value of the predicted annuity benefit.

Hook Law Center
295 Bendix Road, Suite 170
Virginia Beach, Virginia 23452-1294
Phone: 757-399-7506
Fax: 757-397-1267

SUFFOLK
5806 Harbour View Blvd.
Suite 203
Suffolk VA 23435
Phone: 757-399-7506
Fax: 757-397-1267
http://www.hooklawcenter.com/

  • It’s Time to Update Your Estate Plan!
    <p>Ensuring your estate plan is up-to-date is a critical part of ensuring that your lifetime’s work benefits you and your family the way YOU want it to. Our clients frequently ask us when they should review or update their estate plan – for this, there is no short answer. However, if any of the statements [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2022/06/28/its-time-to-update-your-estate-plan/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2022/06/28/its-time-to-update-your-estate-plan/" target="_blank">It's Time to Update Your Estate Plan!</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Tips for Avoiding Identity Theft
    <p>A headache no one wants to deal with — but over 13 million Americans fell victim to last year — is identify theft. Take these steps to minimize your risk. Choose online passwords carefully. Use a different password for every online account; the passwords you use to log in to your e-mail address and your [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2022/06/21/tips-for-avoiding-identity-theft/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2022/06/21/tips-for-avoiding-identity-theft/" target="_blank">Tips for Avoiding Identity Theft</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Estate Planning for Pet Owners
    <p>Several of us at the Hook Law Center are pet owners.  Our pets are important to us, like members of our families.  We find that many of our clients are pet owners, as well, but they often forget to make provisions for their pets in the event that they were to become unable to care [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2022/06/14/estate-planning-for-pet-owners/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2022/06/14/estate-planning-for-pet-owners/" target="_blank">Estate Planning for Pet Owners</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Not Gone, but Occasionally Forgotten . . . Proposed Regulations Remind of Estate Tax
    <p>In 2022, the federal estate tax exemption is $12.06 million. This means that an individual can pass up to $12.06 million without paying a federal estate tax (Virginia and North Carolina have both essentially eliminated their estate tax). Thus, for the vast majority of Americans, there is no concern about having to pay a federal [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2022/06/07/not-gone-but-occasionally-forgotten-proposed-regulations-remind-of-estate-tax/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2022/06/07/not-gone-but-occasionally-forgotten-proposed-regulations-remind-of-estate-tax/" target="_blank">Not Gone, but Occasionally Forgotten . . . Proposed Regulations Remind of Estate Tax</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • How to Cope with End-Stage Dementia
    <p>No one likes to imagine what will happen if a loved one is diagnosed with dementia. The reality of a dementia diagnosis is difficult and heartbreaking to face, but if you fail to face it before the situation becomes a crisis, you may actually be doing your loved ones more harm than good. This is [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2022/05/31/how-to-cope-with-end-stage-dementia-2/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2022/05/31/how-to-cope-with-end-stage-dementia-2/" target="_blank">How to Cope with End-Stage Dementia</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>

Tags: , , , , ,



Get headlines from Law Firm Newswire sent right to your inbox.

* indicates required