Have you ever wondered how people secured their retirement income in ancient times? Look no further than the Roman Empire over two thousand years ago, where speculators sold a payout known as Annua – the root word for what we know as annuities today. Fast forward to 1720 in the United States, where the Presbyterian Church used annuities to provide a secure retirement for aging ministers and their families, widows, and orphans. Annuities have been a reliable and vital financial tool for individuals, organizations, and businesses worldwide ever since. In 1912, Pennsylvania Company Insurance was among the first to offer annuities to the general public in the United States. Today, annuities continue to grow in popularity as people look for secure ways to guarantee retirement income. Many notable people throughout history have made use of annuities, including Benjamin Franklin, Babe Ruth, OJ Simpson, and even former Federal Reserve Chairman Ben Bernanke, who disclosed that his major financial assets were two annuities.
One type of annuity that has gained significant attention over the years is the deferred annuity. As the name suggests, a deferred annuity allows for deferral in the payout, which allows the value of the annuity to increase. After a deferral period, the annuity can produce more income, providing a lifetime of financial stability. Deferred annuities can be purchased in periodic, systematic, or lump sum payments, providing flexibility to suit individual needs.
Deferred annuities have the added advantage of tax deferral, making them commonly referred to as tax-deferred annuities. With tax deferral, you can earn interest on your annuity without paying taxes until you withdraw funds from the annuity. This makes it an attractive option for individuals looking to build a retirement nest egg.
Fixed deferred annuities are typically invested in high-quality A-AAA government and investment-grade bonds, providing stability and no risk to the client. On the other hand, variable deferred annuities are invested in the securities market, and clients assume the market risk. Fixed index deferred annuities use the index as a gauge to credit interest to the client, providing a balance between market risk and stability.
One unique feature of deferred annuities is that they are creditor-protected in most states, providing an added layer of security for individuals concerned about protecting their assets. Additionally, a CD deferred annuity refers to a type of annuity that has a multi-year interest guarantee, similar to a bank-issued CD.
It’s important to note that deferred annuities are first guaranteed by the claims-paying ability of the insurer, and then each state has a State Insurance Guarantee Association (SIGA) with varying coverage limits. Therefore, it’s essential to choose a reputable insurer and do your due diligence before investing in a deferred annuity.
In conclusion, annuities have a rich and successful history, dating back to ancient Rome, and continue to provide a reliable financial tool for individuals, organizations, and businesses worldwide. Deferred annuities, in particular, offer flexibility, tax deferral, and stability, making them a popular choice for those looking to secure their retirement income.
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