This type of annuity provides a client with a guaranteed rate of return each year. There are two different types of traditional fixed annuities, and the major difference is how long the annuity product will lock in the interest rate guarantee. Both types provide tax deferred interest accumulation and always have a guaranteed minimum interest rate every year (this is the guaranteed minimum rate of interest the annuity product will ever credit and is generally 2% or 3%).
For example, an annuity has an initial declared rate of 4% for 5 years. If you purchased and annuity with $100,000 and earned 4% in year 1, the accumulated value at the end of the year would be $104,000. After year 2 it would be $108,160, $112,486 after year 3, $116,985 after year 4, and $121,665 after year 5.
With this type of annuity, the insurance company provides a declared rate of interest every year. For example, an annuity pays you 4% guaranteed for one year. On the one year anniversary date, the insurance company will declare what the interest rate will be for the next 12 months. The nice thing about this type of fixed annuity is if the interest rates go up, you could possibly get a higher rate than the previous year. In addition, some of the annual declared rate fixed annuities have a bonus in the first year. For example, a $100,000 premium earns 4% for the first year with a premium bonus of 4%. The combined first year interest earnings would be 8% with the bonus. At the end of the first year, you would have $108,160. At the end of the second year, with a renewal rate of 4%, the account value would be $112,486.
With this type of annuity, the insurance company provides a declared rate of interest every year. For example, an annuity pays you 4% guaranteed for one year. On the one year anniversary date, the insurance company will declare what the interest rate will be for the next 12 months. The nice thing about this type of fixed annuity is if the interest rates go up, you could possibly get a higher rate than the previous year. In addition, some of the annual declared rate fixed annuities have a bonus in the first year. For example, a $100,000 premium earns 4% for the first year with a premium bonus of 4%. The combined first year interest earnings would be 8% with the bonus. At the end of the first year, you would have $108,160. At the end of the second year, with a renewal rate of 4%, the account value would be $112,486.
This type of annuity provides a client with a guaranteed rate of return each year. There are two different types of traditional fixed annuities, and the major difference is how long the annuity product will lock in the interest rate guarantee. Both types provide tax deferred interest accumulation and always have a guaranteed minimum interest rate every year (this is the guaranteed minimum rate of interest the annuity product will ever credit and is generally 2% or 3%).
For example, an annuity has an initial declared rate of 4% for 5 years. If you purchased an annuity with $100,000 and earned 4% in year 1, the accumulated value at the end of the year would be $104,000. After year 2 it would be $108,160, $112,486 after year 3, $116,985 after year 4, and $121,665 after year 5.
With this type of annuity, the insurance company provides a declared rate of interest every year. For example, an annuity pays you 4% guaranteed for one year. On the one year anniversary date, the insurance company will declare what the interest rate will be for the next 12 months. The nice thing about this type of fixed annuity is if the interest rates go up, you could possibly get a higher rate than the previous year. In addition, some of the annual declared rate fixed annuities have a bonus in the first year. For example, a $100,000 premium earns 4% for the first year with a premium bonus of 4%. The combined first year interest earnings would be 8% with the bonus. At the end of the first year, you would have $108,160. At the end of the second year, with a renewal rate of 4%, the account value would be $112,486.
With this type of annuity, the insurance company provides a declared rate of interest every year. For example, an annuity pays you 4% guaranteed for one year. On the one year anniversary date, the insurance company will declare what the interest rate will be for the next 12 months. The nice thing about this type of fixed annuity is if the interest rates go up, you could possibly get a higher rate than the previous year. In addition, some of the annual declared rate fixed annuities have a bonus in the first year. For example, a $100,000 premium earns 4% for the first year with a premium bonus of 4%. The combined first year interest earnings would be 8% with the bonus. At the end of the first year, you would have $108,160. At the end of the second year, with a renewal rate of 4%, the account value would be $112,486.
Terry Tyler | Managing Partner
Paula Cleven | Partner
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation.
Investment Adviser Representative and Advisory Services offered through
Royal Fund Management, LLC,
a SEC Registered Investment Advisory firm. Legacy Retirement Services and Royal Fund Management, LLC are unaffiliate entities.
Insurance product guarantees are subject to the claims-paying ability of the issuing company. The adviser is paid commissions on the sale of insurance products.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All information is based on sources deemed to be reliable, but no warranty or guarantee is made as to its accuracy or completeness.
Advisory services are offered through Royal Fund Management, LLC, which is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.
All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. There are no assurances that a client’s portfolio will match or outperform any particular benchmark.
Tax and legal information provided is general in nature and is subject to change. Always consult an attorney or tax professional regarding your specific legal or tax situation.