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Annuities, Life Insurance, Long-Term Care


An annuity is a unique financial instrument. In fact, an annuity can not only promise but guarantee* an income that can never be outlived. There are some who lump every annuity together, even though there are many different types. Unknowingly, like it or not, every American who takes advantage of the Social Security retirement system is taking advantage of the lifetime income benefits of an annuity.

It's said that the first annuity was invented well over 500 years ago. Since then, the annuity has evolved into a modern financial instrument that has grown far beyond its old predecessor.

Immediate Annuities

At its core an annuity is an account into which a purchaser deposits money in exchange for an issuer; always and only an insurance company guarantees to make payments for a specified period of time. This type of annuity, the most basic, is known as a single premium immediate annuity. According to The Insured Retirement Institute (IRI) in the 1st quarter of 2010, the single premium immediate annuity is the least purchased type of annuity, accounting for approximately 10.9% of all annuity sales.

Variable/Deferred Annuities

At the other end of the spectrum from the single premium immediate annuity (the least sold) is the most sold type of annuity known as the variable annuity. A variable annuity is more akin to a mutual fund type of investment inside of what is frequently referred to as "an annuity wrapper.” The phrase "annuity wrapper” simply means that in variable annuities, the owner selects from the sub-accounts "inside” the variable annuity and allocate their money among those different funds.

A variable annuity is usually an example of a "deferred annuity.” A deferred annuity is one in which the purchaser makes either a single or multiple deposits and rather than allowing the issuer to take their money and immediately create an income, they allow their money to grow and compound. In a deferred annuity, the owner is able to leave their money to grow for almost as long as they wish. In addition to the deferred variable annuity there is a deferred fixed annuity.

Fixed Annuities/Fixed Index Annuities

There are two major different types of fixed annuities: a fixed rate annuity and a fixed index annuity. A fixed rate annuity credits interest that is declared, or stated, by the insurance company. A fixed rate annuity is often likened to a certificate of deposit. The other type of fixed annuity, the fixed index annuity, also credit interest. However, the interest credited by a fixed index annuity is not known in advance. Interest in a fixed index annuity is calculated based on a financial formula. These financial formulas usually look at a specific period of time, for example the last 12 months, and measure the gain, if any, in a selected financial index. If there is a gain in the index (for example the Dow Jones Industrial Average or the Standard & Poor's 500) then the formula calculates how much interest the owner of the fixed interest annuity will earn.
No matter how you slice it, the fabled annuity is an interesting financial alternative that provides guarantees and tax advantages.

One of the unique elements of an annuity is that growth on the account is tax-deferred as long as it remains inside the annuity account. This tax-deferral is a powerful positive attribute that few other investments aside from an annuity can claim and deliver on.

*Guarantees are based on the claim paying ability of the insurer.


Why Life Insurance? Several reasons to consider life insurance options: 1) Life insurance can provide replacement of income to the policy holders beneficiaries. 2) Life insurance can potentially provide education funds for the policy holders children or funds to help pay off mortgages, etc., helping the family to proceed as free of financial difficulties as possible. 3) Certain types of life insurance can help provide tax free income at retirement similar to Roth IRA accounts but without the annual contribution or income limits associated with Roth accounts. 4) Life insurance can offset the loss of pension and/or Social Security income in retirement due to the death of a spouse. 5) Life insurance can help replace the savings you would have made through your 401(k) or other retirement plan(s).

*The information above regarding life insurance is general in scope. Coverage options and availabilities would depend on individual circumstances and the insurance provider's policies.


Long-Term Care is a vital part of a sustainable estate plan. Today there are long-term care companies that offer three levels of care. In-home care, assisted care, and nursing home care. If you should pass away and never need to use the coverage, there are now companies that offer beneficiary packages very similar to life insurance contracts.

*The information above regarding LTC is general in scope. Coverage options and availabilities will depend on individual circumstances and the insurance provider's policies.