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Both annuities and life insurance should be considered in your long-term financial plan. While both include death benefits, you buy life insurance in the event you die too soon and an annuity in case you live too long. In other words, life insurance provides economic protection to your loved ones if you die before your financial obligations to them are met, while annuities guard against outliving your assets.

Contact Mr. Mark Gardner today at 214-762-2327   or

email him at MarkGardner@RetireWellDallas.com to further discuss your personal issues and needs

Annuities can serve many useful purposes.

If you are in a saving-money stage of life, a deferred annuity can:

Help you meet your retirement income goals. Employer-sponsored plans such as a 401(k), 403(b) or Keogh are an important part of planning for retirement. However, contributions to these plans and to IRAs are limited, and they might not add up to enough for the retirement income you need, especially if you started saving for retirement late or had contributions interrupted—perhaps due to job changes and/or family responsibilities. Moreover, your social security and defined-benefit pension (if you have one) may provide less than you need to retire. Remember that the purchasing power of defined-benefit pension income is eroded by inflation.

Help you diversify your investment portfolio. Investment experts routinely advise that, to get the best return for a given level of risk, you should diversify your investments among a number of asset classes. Fixed annuities, in particular, offer a unique asset class—an investment that is guaranteed not to decrease and that will actually increase at a specified interest rate (and, often, potentially more). The guarantees are supported by the claims-paying ability of the insurer.

Help you manage your investment portfolio. Investment experts routinely advise that, whenever your investments in various asset classes get too far from the percentage allocations you prefer, you “rebalance” to the original formulation, by shifting funds from the classes that have grown faster to the ones that have grown more slowly. If you do this with mutual funds, you pay capital gains taxes; if you do it in a variable annuity, you don’t pay capital gains taxes. When you eventually withdraw money from the annuity (which could be many years after the rebalancing), you pay tax then at the ordinary income rate.

If you are in a need-income stage of life, an immediate annuity can:

Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.

Help protect your assets from creditors. Generally the most that creditors can access is the payments from an immediate annuity as they’re made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities.

In its most general sense, an annuity is an agreement for one person or organization to pay another a stream or series of payments. Usually the term “annuity” relates to a contract between you and a life insurance company, but a charity or a trust can take the place of the insurance company.

There are many categories of annuities. They can be classified by:

• Nature of the underlying investment – fixed or variable
• Primary purpose – accumulation or pay-out (deferred or immediate)
• Nature of pay-out commitment – fixed period, fixed amount, or lifetime
• Tax status – qualified or nonqualified
• Premium payment arrangement – single premium or flexible premium

An annuity can be classified in several of these categories at once. For example, you might buy a nonqualified single premium deferred variable annuity. For brief definitions of these categories, click here.

In general, annuities have the following attractive features:

Tax deferral on investment earnings

Many investments are taxed year by year, but the investment earnings—capital gains and investment income—in annuities aren’t taxable until you withdraw money. This tax deferral is also true of 401(k)s and IRAs; however, unlike these products, there are no limits on the amount you can put into an annuity. Moreover, the minimum withdrawal requirements for annuities are much more liberal than they are for 401(k)s and IRAs.

Protection from creditors

If you own an immediate annuity (that is, you are receiving money from an insurance company), generally the most that creditors can access is the payments as they’re made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities. And your money in tax-favored retirement plans, such as IRAs and 401(k)s, are generally protected, whether invested in an annuity or not.

An array of investment options, including “floors”

Many annuity companies offer a variety of investment options. You can invest in a fixed annuity which would credit a specified interest rate, similar to a bank Certificate of Deposit (CD). If you buy a variable annuity, your money can be invested in stock or bond (or other) mutual funds. In recent years, annuity companies have created various types of “floors” that limit the extent of investment decline from an increasing reference point. For example, the annuity may offer a feature that guarantees your investment will never fall below its value on its most recent policy anniversary.

Tax-free transfers among investment options

In contrast to mutual funds and other investments made with “after-tax money,” with annuities there are no tax consequences if you change how your funds are invested. This can be particularly valuable if you are using a strategy called “rebalancing,” which is recommended by many financial advisors. Under rebalancing, you shift your investments periodically to return them to the proportions that you determine represent the risk/return combination most appropriate for your situation.

Lifetime income

A lifetime immediate annuity converts an investment into a stream of payments that last as long as you do. In concept, the payments come from three “pockets”: Your investment, investment earnings and money from a pool of people in your group who do not live as long as actuarial tables forecast. It’s the pooling that’s unique to annuities, and it’s what enables annuity companies to be able to guarantee you a lifetime income.

Benefits to your heirs

There is a common misconception about annuities that goes like this: if you start an immediate lifetime annuity and die soon after that, the insurance company keeps all of your investment in the annuity. That can happen, but it doesn’t have to. To prevent it, buy a “guaranteed period” with the immediate annuity. A guaranteed period commits the insurance company to continue payments after you die to one or more beneficiaries you designate; the payments continue to the end of the stated guaranteed period—usually 10 or 20 years (measured from when you started receiving the annuity payments). Moreover, annuity benefits that pass to beneficiaries don’t go through probate and aren’t governed by your will.

Contact Mr. Mark Gardner today at 214-762-2327 or email him at MarkGardner@RetireWellDallas.com to further discuss your personal issues and needs.

Final expense insurance is an insurance policy used to pay for funeral services and a burial when the named insured dies. Such a policy helps ease the financial burden placed on a family when a loved one dies. Final expense insurance allows the named insured to feel safe knowing that funeral-related expenses are covered regardless of the statutes of their estate at the time of death.

Tips for those considering Final Expense Insurance

• Why Final Expense Life insurance?

Nobody lives forever. This harsh reality that we all have to face reminds us of how important it is to have a life insurance policy, especially if there are others who depend on your income. The silver lining, though, is that taking the time now to plan for the future and investing in a life insurance policy will help to ensure that your dependents have adequate funds when you are no longer here to care for them.

• What things should I know or my family when it comes to paying for or help arrange someone’s funeral or burial?
• What is the average cost for a funeral today?
• When you pass away, who will be responsible for the cost and arrangements of your funeral? Do they have enough funds to pay for this funeral or do you plan on paying for your own burial expenses?
• Do you have any family member whom you would like to leave money to or maybe a charity or friend? Is there anyone you would like to leave an inheritance to?
• When you pass away, do you have any way to replace your income to help out your spouse? If not, what is your spouse going to do for extra money?
• How much do you think final expenses cost today? Including burial and memorial service etc? If you lived until you were 80 or 90, how much do you think it would cost? (You can use an inflation calculator to figure it out).
• Did you know that your assets and your bank account are not immediately available upon your death? Do your children or family have enough money set aside to pay for the immediate cost of final expenses while they wait for access to your assets?
• Are you aware that you can either pay for your insurance policy in one single payment, annual payment or small monthly payments? Which would work best for you?
• How is your health? Have you ever been turned down for life insurance? Do you take any medications? Can I see those medications? (write down the names of the medications and make sure they are not on the insurance company list that make it so they automatically declined for final expense coverage).
• Who would you like to be your beneficiary?
• If you don’t take out a policy for your final expense burial, what is your alternative plan?

By asking these questions, you will get a good idea whether or not final expense life insurance is a good fit for the client. You will also get a good feel whether or not its something they would like to have. Sometimes people just don’t think about it but with a little bit of probing and discovering, they will see that its something that they would like to have and if they trust you, they will just go ahead and buy it from you.

It’s a fact. Death is expensive and no one who cares about their loved ones wants to leave a large bill for them to pay for. Just about anyone is willing to pay $35 or more a month to avoid a $10,000 fee for their loved ones. It is such an easy sale (especially with the final expense presentation).

Contact Mr. Mark Gardner today at 214-762-2327 or email him at MarkGardner@RetireWellDallas.com to further discuss your personal issues and needs