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/

  • FDA Grants Approval for Alzheimer’s Drug
    <p>On June 7, 2021, the United States Food and Drug Administration (FDA) granted accelerated approval for Aduhelm, a drug that can be used to treat Alzheimer’s disease. This drug is a monthly infusion meant to reduce amyloid protein clumps in the brain, which are a common marker of Alzheimer’s disease. This is the first new [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2021/06/10/fda-grants-approval-for-alzheimers-drug/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2021/06/10/fda-grants-approval-for-alzheimers-drug/" target="_blank">FDA Grants Approval for Alzheimer’s Drug</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Transferring Your Home to Your Trust: What If There Is a Mortgage?
    <p>Many of our clients choose to use Revocable Living Trusts as part of their estate plan.  There are many benefits of using a Trust, one of which is the avoidance of probate when distributing assets of a Trust to beneficiaries at death.  The question inevitably comes up about what to do with the personal residence.  [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2021/06/04/transferring-your-home-to-your-trust-what-if-there-is-a-mortgage/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2021/06/04/transferring-your-home-to-your-trust-what-if-there-is-a-mortgage/" target="_blank">Transferring Your Home to Your Trust: What If There Is a Mortgage?</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Tax Effective Charitable Giving Strategies: Charitable Gifting with Retirement Accounts
    <p>In our ongoing review of tax effective charitable giving strategies, this article will discuss charitable giving with retirement accounts. Over 50% of households in the U.S. have ownership in at least one retirement account and retirement assets in the U.S. exceeds $28 trillion dollars. Retirement accounts are often seen as an easy way to save [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2021/05/25/charitable-gifting-with-retirement-accounts/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2021/05/25/charitable-gifting-with-retirement-accounts/" target="_blank">Tax Effective Charitable Giving Strategies: Charitable Gifting with Retirement Accounts</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Driving Habits can Predict Dementia
    <p>A recent study published by the MDPI Journal of Geriatrics analyzed naturalistic driving data to predict mild cognitive impairment and dementia in older drivers. The study used driving variables to predict whether a driver would later be diagnosed with mild cognitive impairment or dementia. While there are quite a few studies that examine the driving [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2021/05/20/driving-habits-can-predict-dementia/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2021/05/20/driving-habits-can-predict-dementia/" target="_blank">Driving Habits can Predict Dementia</a> first appeared on <a href="https://hooklawcenter.com/" target="_blank">Hook Law Center</a>.</p>
  • Tax Effective Charitable Giving Strategies for Individuals – Part 1, Current Gifts
    <p>Charitable giving is often an important part of financial planning and estate planning as well as tax planning. Charitable giving should be considered year-round, not just as an end-of-year tax planning tool. This article will begin a discussion on charitable giving strategies which can achieve positive tax results. The Tax Cuts and Jobs Act made [...]</p>
    <p><a class="btn btn-secondary bravehart-read-more-link" href="https://hooklawcenter.com/2021/05/11/tax-effective-charitable-giving-strategies-for-individuals-part-1-current-gifts/">Read More...</a></p>
    <p>The post <a href="https://hooklawcenter.com/2021/05/11/tax-effective-charitable-giving-strategies-for-individuals-part-1-current-gifts/" target="_blank">Tax Effective Charitable Giving Strategies for Individuals – Part 1, Current Gifts</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