annuity
annuity questions and answers
Learn about annuity at the number one young investor website Teen Analyst.
Q: If a mutual fund is sold, then purchased back within an annuity, is it considered a wash sale?
I want to sell a position, then purchase an annuity and allocate all the proceeds into the same fund within the annuity. Can I take a tax loss, or is that a wash sale?
A: Interesting question. I do not know the answer. An annuity is not "substantially identical" but the IRS is the final judge on that question not you and not I. The same question arises in selling one S&P500 index fund at a loss and replacing it with another. The IRS might very well consider them substantially identical.
Are you aware of the tax consequenses and additional fees associate with annuities? Annuites are not taxed the same way that mutual funds are taxed. All gains from annuities are taxed as ordinary income although it is deferred.
Q: Why do payments come out lower with monthly compounding when using the ordinary annuity formula?
It seems counter-intuitive, but when I try to solve for monthly payments on this problem, the payments are lower for the annuity that is compounded monthly.
Problem:
A debt of $25,000 is to be amortized over 7 years at an annual interest rate of 7%. Calculate the value of monthly payments (a) if interest is compounded once a year, and (b) if interest is compounded monthly.
I get $386.57 as the monthly payment for the annually compounded debt and $377.32 for the monthly payments for the debt compounded monthly.
A: First you need to kick gay Hussein Obama extremely hard in the nuts
Then you can figure interest compounded annually
Convert 7%
Effective rate for period = (1 + annual rate) ^ (1 / # of periods) - 1
0.5654% =(1+0.07)^(1/12)-1
Use this answer & punch it in your formula while adjusting the time to 7*12
374.69 = 25000 * ((0.005654/1) / (1-(1+0.005654/1) ^ (-1*(7*12))))
Answer: $374.69
Q: Is there a penalty for withdrawing the money from my annuity?
I have annuities with AIG Annuity and I was wondering about the penalty fee for withdrawing the money from my annuity. I can't find it in my paperwork and I since AIG is getting so many calls I can't contact them. I was wondering if anyone here happened to know.
It's a deferred annuity, I started it about 3 years ago.
A: I sell AIG annuities,
Is this a fixed annuity?
What is the term 5-7 years?
For example, if you started a fixed 5 year annuity back in 2000 you will be able to close it out without a surrender fee. If you are not out of your term period there will be a penalty from AIG.
Who is your agent for that contract they should have a copy of the paperwork to help you out.
I wish I could talk to you one on one to get more information so I could help you determine.
edit: all annities are deferred. is it fixed? Most liekly you will get a penalty.
Q: Has anyone purchased an Annuity for the sole purpose of hiding money from Colleges on the FAFSA application?
In researching reasons to purchase anuities, no one has on their list of reasons, to hide money so it does not appear on the FAFSA college form. The less money you have the greater the possibility of you receiving more aid from a college for your child. An annuity is one item that does not need to be declared on the FAFSA form. Has anyone else done this and what were the results from the colleges as far as granting aid? Also what type of annuity(s) did you purchase?
A: It is true that you do not have to include the value of annuities in parent asset questions of the fafsa. Remember this is also true of retirement plans and the equity in your house.
I think you need to realize the Dept of Ed calculates the majority of a students EFC based on income, not assets. Those with higher incomes do not qualify for federal grants but are offered federal loans only. It is my experience, that if the parent has enough money to have the option of investing in this manner, the annual household INCOME will still be too high to get them grants, and shifting and changing isn't making much difference. However, every family situation is different so I'm certainly not telling you not to check it out.
Oh, and if you DO decide annuities are right for you and then have distributions during that year they would be included on line 16a of your Income tax return, thus being included in your AGI, thus being used in calculating the students EFC. (The value is not reported, just the pay out).
Hope this makes sense..
Q: How to do calculate what I will really yield on an annuity?
Let's say I have $100,000 to invest; say the annuity would pay me 5%.
I guess it would be a fixed-rate type in this case. After the commission is taken out, how do I figure the bottom line of what I am making, so I can compare it to another fixed-rate product?
To figure the tax, would I just use the tax bracket I expect to be in this year and get a % from that and deduct that from the yield figure I got from dividing what I got yearly by what I invested?
A: You will also need to calculate how much tax if the product is not tax-exempted. The final amount that you get per annum divided by the amount that you invested will be the yield.
Updated: The tax may be based on income tax or capital gain tax. You can get the information by asking or reading the prospectus.
Q: How can I withdraw my fixed annuity before you are 59 years old?
i have an annuity with Tiaa Cref, and amidst all this mess I want to withdraw.
A: That might be the worst thing to do. Annuity's guarantee your income at the amount you invested or greater. Taking a full withdraw of your money could result in you losing thousands, depending upon your amount. With the market the way it is those individuals with an annuity may be the ones in the best situation.
Q: Does anyone know about an annuity and being taxed?
My husband was in a car accident when he was 15 and his settlement money was put into an annuity until he reaches the age of 30. (He's 24 now) I was just wondering...Do we pay taxes on the annuity when he receives it? If so, does anyone know about what percentage rate he will be taxed at?
A: The money that was invested in the annuity may or may not be taxable to your husband. It depends on the type of settlement, and whether or not punitive damages were awarded.
The earnings on the money are taxable income. Unless those taxes were paid as the earnings accrued, which appears from your question did not occur, the earnings will definitely be taxable when they are withdrawn.
Regardless of how the earnings were made, the earnings will be taxed at your regular income tax rate, not a preferential rate like capital gains. This could vary from 10% up to 38%.
Depending on whether the original investment was taxable or not, and also depending on how the money is disbursed, a portion of each payment could be deemed a return of the original investment, and therefore not taxable. Or, under other circumstances, all of the original investment may be considered returned to the annuitant before any of the earnings.
Before you take any money out of this investment, find out more about it and what your options are. You may or may not want to "annuitize" this money. Be very careful and get some very good advice and take your time making up your mind.
Q: How is a single premium deferred annuity taxed by the IRS?
The annuity is nonqualified fixed annuity with a 7 year term which will expire in November of this year. Is there a way to spread taxes into a number of years?
A: The money is taxed only when dispersed to you. (or when it is made available)
Perhaps the annuity could be spread out over a longer pay out. See if you can roll it over...or something creative with your broker like putting it into another financial instrument.
Otherwise you pay the tax on the money as it is made available to you
Q: How do I avoid the 10% penalty for early withdrawal from a variable annuity?
Seventeen years ago my dad set up a variable annuity from Nationwide Insurance for my newborn daughter to help with her college expenses. I was named the custodian (until she is 18), and also the beneficiary. I now want to take that money and use it for her college expenses, but it looks like from the contract that she will incur a 10% penalty for this withdrawal before age 59.5. Is there a way to avoid this penalty by using the funds for a college education?
A: You may avoid the 10% if you leave a portion in the account. But, you will still pay taxes.
Talk to your banker about the possibility of borrowing against the inuity. You'll be interest, but it may work out more in your favor in the long run.
Q: How do i find the future value of this annuity?
wat is the future calue of an annuity after 20 years if the interest rate is 3% p.a and there is a monthly premium of $1150 is paid.
please help.
A: = $1,150.00(SUM[{1 + 0.03/12}^{20 * 12}])
= $1,150.00(SUM[{1 + 0.0025}^240])
= $1,150.00(SUM[1.0025^240])
= $1,150.00(329.122753121908)
= $378,491.17
Answer: $378,491.17
Q: I am wanting to invest in an annuity to provide supplemental income, how does this work?
I am wanting to invest in an annuity with a portion of my savings (at least $5000) in order to generate some supplemental income while I am earning my engineering degree. What would be a good annuity to invest in providing immediate returns, with those returns being as large as possible? How would this system work?
A: As for a paying out annuity, commonly called an immediate annuity, is something that some companies can issue at a wide variety of ages, but usually that is a cash-out option from a life insurance policy after someone had died.
Here is how you do-it-yourself. First, start with the lump sum you are wanting to pay out. Next, determine the period of time that you want to pay out over, along with how often during that time you are going to want to pay yourself. Then you have to put the principle to work, bank, stocks, bonds, something. Now compute the income stream, which will be diminishing as you draw out the principle when then interest payments. (BTW, most spreadsheets will have functions that will do most of the calculations for you). At least this way you don't have some of the income sapped for the salesman's commissions, unfortunately you will have to pay taxes on the investment income. Essentially, you are divvying out your funds over the period and get the extra advantage of a few extra bucks the bank pays you for the money you have left in savings. $5,000 over 12 months is $416.66. If you get 2 percent from a common savings account, is about $100 a year, but since you are drawing down that, using the inverse rule of thumb, you will only average about one-third, some $30-40 over the year. That means instead of collecting $416 a month, it will be closer to $420 each month.
Now if you save up for retirement, then an annuity can be a safe and substantial stream of retirement earnings. What you are trying to do is too little--too soon. Think of it like fruit, you haven't given it time to ripen.
Q: What Is Inactive Annuity, And How Do You Receive?
My father passed away not long ago, he had a group life insurance through his job. I was just told that he had an inactive annuity. What is needed to be done to receive this?? And what does the "inactive annuity" mean??
A: As I understand it an inactive annuity is just an annuity that is no longer receiving contributions. It still accrues interest though.
The plans custodian or someone in the company that is handling the annuity for the company your dad worked for will be able to tell you exactly what to do to receive the funds assuming that you are the beneficiary.
You can go here https://www.neibenefits.org/memberdocs/2003ECAnnuity401KSPD.pdf and get an idea about how it works, but this is for the elevator constructors union annuity which is handled by Mass Mutual. Your dad's may be different.
Also, I'm very sorry to hear about your dad.
Q: i am 58 yrs old. closed annuity and am reinvesting in a mutual fund with another co. will i avoid tax burden?
i am 58 yrs old. i closed my annuity account and i am going to reinvest with another company in a mutual fund. will i avoid the tax burden since i closed out account before i am 59 1/2 and 1 am reinvesting within 60 days?
A: You must complete the rollover by the 60th day following the day on which you receive the distribution.
An exception to this rule is if the annuity was from a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 .
Q: Is it better to put retirement savings in a Roth IRA or tax-sheltered annuity?
My employer offers a 401(a) pension plan to which they make contributions. I plan on enrolling in this so that I will get the max contribution from them. For other retirement savings, they also offer a tax-sheltered annuity 403(b) plan. Would it be better to contribute to a Roth IRA or participate in the 403(b) plan for my retirement savings?
A: That is a question that will vary depending on your personal financial information. For most, the Roth would probably be the best vehicle, because of the lower fee structure and the tax-free distributions available after age 59 and a half. However, there are situations in which the 403(b) is also an appropriate vehicle. That is a situation that you should talk to a personal financial advisor so that you can review your overall goals and financial situation and then make an informed decision. It also depends on what funds are available in each. If there are better-suited fund choices in the 403(b) portfolio, then perhaps maxing out the 401-k to the employer's matching portion is good, then investing the rest into the 403(b) for a more suitable return.
Many questions are fairly easy to answer here, but this one requires too much personal information to be given over the internet. Not good.
Q: My 90 yr old grandmother opened an annuity years ago for her cremation. Should I move it for more interest?
The annuity has come to term. The account I am moving it to is 1 % higher and will have easier access. I am returning home for a baby shower and thought it might be a good idea to purchase the cremation package before my grandmother dies. I live out of state and a portion of the money will be used to get other siblings and myself to our home town. I am the sole person on the annuity and I will be handling my grandmother's estate.
A: i think what you are doing make a lot of sence and i would say go for it!!!