Understanding FIXED annuities.
Note the word FIXED preceding annuity, it’s a big deal.
First, please understand, no one has EVER gotten rich by putting their money into an annuity.
A Traditional FIXED Annuity or a FIXED Indexed Annuity is a place to put your money after you’ve made your money and you no longer want to risk your money in stocks, bonds and mutual funds.
The vast majority of seniors aged 70 and above have the bulk of their cash asset in annuities, but why?
#1) Annuities in Florida are EXEMPT from legal process. No lawyer can get a judgment against you and attach the money in your annuity. With stocks, bonds, mutual funds, savings accounts, checking accounts or bank CDs the attorneys can get their hands on those types of cash assets.
#2) Lifetime income. Only an annuity can be set up to pay an income you cannot outlive. Try going to your banker or broker and make that deal. They’ll pay you an income until your money runs out.
#3) Avoid Medicaid nursing home spend down. Since you can annuitize an annuity you can protect the principal from Medicaid spend down and have only the monthly income count towards the Medicaid nursing home income test. You CANNOT do that with stocks, bonds, mutual funds, savings accounts, checking accounts or bank CDs. You have to “spend down” to $2,000 BEFORE you qualify for benefits.
#4) Avoids the Probate Court System. The beneficiary designations in an annuity are a SUPERIOR designation that CANNOT be defeated by will or trust or legal process. The money is paid directly to the named beneficiaries. This avoids probate court and in Florida the beneficiaries are also EXEMPT from legal process.
Are there any negatives? YES. All annuities have a surrender charge schedule.
Annuities ARE NOT designed for someone to put their money in and take it right back out or play games with your money like the day traders at a stock market swap meet.
Also the agent who sets up your annuity will earn a commission. If it disturbs you that insurance agents earn commission on EACH and EVERY form of insurance they write then I would suggest you simply don’t buy any form of insurance to protest this injustice.
Fiduciary Financial Consultant