The Primary Reasons People Buy Annuities

Safety of Principal!

Most people have worked hard all their life accumulating their “nest-egg”. They should not put their money in risky investments, especially our senior citizens. Most seniors are more concerned about the “return OF their money than the return ON their money”. Annuities are considered to be safe investments for the following reasons:

  • No market risk
  • Backed by the financial strength of large life insurance companies who are required to set aside a portion of their assets (reserves) to cover claims.
  • They also spread their risk through the industry’s reinsurance network, i.e. several companies share in a particular risk.
  • Tax Deferral – Taxes are paid only when money is received. IRC Section 72  This results in a much faster cash build-up. Your principal grows because you receive:
    • 1) interest on the principal;
    • 2) interest on the interest;
    • 3) interest on the money that normally would have been paid in taxes.

Competitive Interest Rates – At present, and historically, annuities outperform CD’s and money market accounts.

Accessibility– One of the biggest concerns, especially with seniors, is “Do I Have Access to My Money, Should I Need It?” There are a number of choices:

  • Withdraw interest as needed, monthly, quarterly, etc.
  • Exercise free withdrawal privilege
  • Total surrender
  • Annuitize (choose one of a number of income options)

Avoids Probate – By naming a beneficiary, your annuity account is paid directly to a named individual, making it accessible and eliminating probate costs.

Interest Rate Guarantees – Almost all annuity contracts have minimum rate guarantees…the rate can never go below a specified amount.

Current Income Reduction – CD’s, money market accounts, savings accounts, etc. require current taxation of interest earned even if it is not taken. Annuities are taxed only upon receipt of interest.

Lifetime Income Option – Annuities are the only investment vehicles available that guarantee you cannot outlive your monthly payments

Avoid Risk and invest in a tax deferred annuity! Your PRINCIPLE & INTEREST  is FULLY GUARANTEED at all times!!

You get:

  • Triple Compounding
  • Tax Savings
  • No Fees or Load Charges
  • Competitive Interest
  • Probate Avoidance
  • No Market Risk
  • Does not affect taxation of your social security
  • Liquidity (Ability to withdraw funds)  (Brsan)



What about FDIC Insurance?

How much do you have your home insured for? Car? Office Furniture?

Insurance companies are MORE SOLVENT than banks. They have their OWN plans administered by the State of California to protect against any loss of principle. Agents are prohibited from using it in sales presentations. Here’s the link to the California Insurance Code on it. §1067-1067.18Did anyone lose principle when Executive Life went under?

I could always get at least 3% 

There was a time when people told me they could always get 7 – 12% at the bank. The bank DOES NOT GUARANTEE ANY interest rate!!! We are currently paying x% . What is your bank paying now? If you get a CD how much do they charge if you want your money back early? There is NO penalty if you just stop depositing. Will the bank automatically send you your money monthly or annually? Will the bank send you a bill to remind you to send in the money so it can grow? Does your bank promptly answer your questions by email, from someone you’re dealing with personally?

If you take the money out on a “payment” plan and not lump some – there is NO Penalty Doesn’t sound like 5.25% to me? What’s their penalty for early withdrawal? We have NONE if you take the money out over a 3 year period. (I’ll double check the minimum time) What’s the penalty from the Federal Government for early withdrawal on an IRA? The Jackson Annuity is the SAME annuity whether you do it as an IRA, Roth IRA or without the current income tax deduction


This web site is continually evolving, we get weekly reports on every request in our search engine.  Many of you have asked about EARLY WITHDRAWAL.   I’ve cut and pasted several of the questions from the IRS Page on this issue.   Basically, it’s a 10% penalty from the Federal Government.   You will probably have a penalty from the Bank Certificate of Deposit or the Insurance Company Annuity.   You would have to check with your Bank or in the Annuity Policy it will have a page – called Surrender Charges and it will tell you.  When you get your statement, it should show a figure for Accumulated Value and Cash or Surrender Value.

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What are the tax options for lump-sum distributions from retirement plans?

Special tax computations are allowed for qualifying recipients of certain lump-sum distributions from retirement plans. Refer to Tax Topic 412 which discusses Lump-Sum Distributions, or Publication 575 (PDF), Pension and Annuity Income.References:

If we cash in a pension plan while in our thirties, when do we pay the taxes and penalties?

Because our tax system is a pay-as-you-go system, you may need to make an estimated tax payment by the due date for the quarter in which you received the distribution. When calculating your tax liability todetermine whether you need to make an estimated tax payment, your total tax for the year should include the amount of the 10 percentadditional tax on early distributions from qualified retirement plans unless any exception applies.You would calculate the tax on Form 1040ES (PDF), Estimated Tax for Individuals, and any 10 percent additional tax on early distributions from qualified retirement plans on Form 5329 (PDF), Additional Taxes on Qualified Plans (including IRA’s) and other tax-favored accounts.


  • Form 1040ES (PDF), Estimated Tax for Individuals
  • Form 5329 (PDF), Additional Taxes Attributable on Qualified Plans (Including IRA’s) and other tax-favored accounts
  • Publication 505 (PDF), Tax Withholding and Estimated Tax
  • Tax Topic 451Individual retirement arrangements (IRAs)
  • Tax Topic 558Tax on early distributions from retirement plans

CA Insurance Code

Requirements for Replacement of Life Insurance  and Annuity Policies …………………….. 10509-10509.9

Standard Nonforfeiture Law for Individual  Deferred Annuities ……………………. 10168-10168.93

Misrepresentation of Policies ………………….. 780-784
Senior Insurance …………………………. 785-789.10
Unfair Practices …………………………. 790-790.15

General Provisions ……………………… 10110-10127.18

Pension and Annuity Income Glossary – Annuity AdvisorsCalifornia

Insurance Code – Standard Nonforfeiture Law for Individual

Deferred Annuities 10168-10168.92
Requirements for Replacement of Life Insurance – Annuity Policies 10509-10509.9
Article 6.  Misrepresentation of Policies ………………….. 780-784
Article 6.3.  Senior Insurance …………………………. 785-789.10
Article 6.5.  Unfair Practices …………………………. 790-790.15

Power of Tax Deferral -
from North American Brochure  
Tax Deferral

Annuities -

What Seniors Need to know HTML 

CA DOI Pamphlet


NAIC - National Association of Insurance Commissioners

Buyer's Guides

Fixed Deferred Annuities

Deferred Annuities - Variable 

Deferred Annuities - Fixed

Deferred Annuities


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