The way to discover out if annuities are proper to your way of life and targets
Financial advisor David Donhoff shares the risks and benefits of investing in annuities. Funded by Leverage Planners.
SEATTLE – Annuities have a bad rap in the financial world, so understanding if and how this type of investment fits your lifestyle and goals is important.
The origin of the rents goes back to the Roman Empire. They offered families what was known as a “Warrior’s Annua” if they would allow their husbands to go into battle. It was the first known form of social security in case a soldier died and is the basis for today’s pensions.
“An annuity is just a deposit account with an insurance company and the insurance company guarantees a source of income either immediately or at a later date,” said David Donhoff, financial advisor at Leverage Planners Wealth Management. “If we look at our three financial families, insurance company pensions are available in three of these formats.
“As you can imagine, right off the bat, the Red Line annuities are the ones most people talk about negatively. These are also known as variable annuities. Yes, they can make money and they can lose money too. More importantly, however, they are usually very expensive, ranging from 2% to 5% per year in fees and costs. To say the least. “
There are pension options in two more secure financial families. Blue line annuities have low growth rates but are safe and stable. Green line, also known as indexed annuities, will increase with the stock market, not shrink when the market falls. You can later ask the insurance companies that have the annuity to convert the deposit into a guaranteed stream of income, also known as an annuity.
“With Green Line programs, you actually get a pension payout that increases every time the stock market goes up, but you never get a decrease in monthly pension when the markets go down,” Donhoff said. “You benefit from market growth without the risk of loss when the markets fall.”
Indexed annuities are different from qualifying plans like 401ks, IRAs, and Roth IRAs. Donhoff explained the differences.
“So 401ks and IRAs are tax-deferred, they bring taxation onto the streets. Roth IRAs They pay the taxes right up front, but then the money grows tax-free and spends tax-free in the future, “he said.
Right now you can convert money from annuities or other accounts to a Roth IRA and receive a signing bonus of 25%. Bottom line: It is important for investors to focus on protecting their wealth versus building wealth.
“The vast majority of pensions should really be avoided. A small part of the world of pensions is worthwhile for retirees, ”said Donhoff. “I think that’s the high level that we should understand.”
Please visit the Leverage website for more information.
Funded by Leverage Planners. Segment producer Suzie Wiley. Check out New Day Northwest at 11 a.m. on weekdays KING 5 and live streaming on KING5.com. Contact New Day.