Annuity

     An annuity is an insurance company's equivalent to a bank's certificate of deposit or CD.  Included in annuities are Roth IRAs. The difference between an annuity and a CD is the annuity grows tax deferred, meaning the annuity's accumulation in value is not subject to current income tax as a CD.  The deferment makes a difference in the value of the investment over the years, as opposed to making provisions for paying taxes each year on the investment.  An annuity has surrender charges as a CD does. You may withdraw up to 10% of the accumulated value after 1 year from date of issue without penalty from the annuity.  The annuity can be written as a qualified plan, meaning the entire amount deposited is deducted from your taxes.  On the other hand a non qualified plan uses after tax dollars to grow tax deferred.  An annuity has settlement options to provide for equal monthly payments you can not outlive. Some annuities pay a bonus in the first year of issue which credits significantly higher rates than a CD. There are few limitations which would deny a person the ability to write an annuity. A couple of these are minimums based on company requirements and age. Persons approaching 90 years old may have trouble finding a company to write the annuity.

       Some annuities credit interest bonuses to their contracts. The interest bonus is tied to the amount of premium submitted at the time of issuance of the policy, although some annuities credit bonuses during the first five years of the contract when additional money is deposited to the account. This bonus also earns interest within the contract and helps build to the accumulation value. The bonus is used to attract new customers to the company and generates significant additional interest to the contract. The company can credit this additional amount since there are surrender charges that are greater than the bonus, if the client chooses to cancel the contract during the first few years.  A client can access their money without incurring these surrender charges by utilizing the 10% free withdrawal privilege annually or annuitizing the contract which sets the contract up for systematic payment to be made over a period of time, usually five years minimum. The annuity's bonus schedule currently in place credits either 5% or 10% depending on the contract sold. For additional information call your local Farmers Union agent or E-mail  the following address rfields@fumico.net and an agent will be in contact with you.

     We use several companies to place our business.  The main companies we use are Midland National Life Insurance and ING Groep N.V. Both of these companies are financially strong and have great products.