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4 Things You Should Know About Annuities

annuitiesAn annuity is a contract made between you and an insurance company where, in exchange for a lump sum payment, the insurance company will provide you and your family with long-term care benefits, a source of income, asset growth, and a death benefit. Types of annuities include: joint, individual, impaired life, guaranteed, fixed, variable, immediate, and deferred; the most common being a Fixed Annuity.

However, as enticing as annuities may seem to those who are nearing retirement, annuity payments can be tricky, inflexible, and binding. Nevertheless, for those who have run out of options for IRA and 401(k) funding, annuities begin to look like an appealing option. If you are unfamiliar with annuities and what they offer, then you’ve come to the right place. Here are 4 things you should probably know about annuities before investing in one:

1. Annuities don’t offer tax deductions immediately.

Any annuities that are purchased externally from an IRA are funded through the means of after-tax dollars. In simpler terms, you won’t be getting a tax break right off the bat by investing in an annuity. 

2. Most annuities have early withdrawal penalties

Unless you are faced with a debilitating ailment or pass way, you and your family are not allowed to make early withdrawals from your annuity. If you do, you will be faced with a hefty penalty. Normally, you will be charged with a fine of 10% of your withdrawal amount in the event you take money out of your annuity before your allotted time. The same rule applies to IRA’s and 401(k)’s: if you decided to withdraw money before the age of 59 ½, you will be penalized with a 10% fine of your withdrawal amount.  

3. Things get expensive if you cancel

If you break the signed contract made with an investor and decided to cancel your annuity plan, you will be held accountable for a significant amount of money. This is typically known as a surrender charge and based on the investor you purchased your annuity from, you will be required to pay approximately 7% of your total funds during the first year. The only sure way you can avoid paying a surrender charge is if you decided to cancel your plan during the first 30 days.

Of course, similar to the penalties for withdrawing funds early, there are a few exceptions in which you won’t be required to pay a sum of your money if you cancel your plan early. If you become disabled, terminally ill, or pass away, you or your family will not be faced with fines upon canceling your annuity plan.

4. Annuity withdrawals are partially taxable

Any withdrawals that are made from your annuity will be subject to taxes. However, the taxation rules and process differ from your standard IRA or 401 (k).

In the case of an annuity, you will be taxed in what they call a ‘last-in, first-out’ basis. This means that when you make your withdrawals, your money will be classified as ‘earnings’ and therefore, will be taxed. However, this will no longer be the case when the overall value of your annuity becomes lower than the sum you paid in premiums.

Sell Your Annuity or Structured Settlement with Rising Capital Associates

Annuities can be a very difficult investment to take part in and requires many rules, terms, and guidelines to be followed accordingly. However, there are many people who decide to invest in an annuity and later find that it does not meet their expectations or simply can no longer afford the premiums that are required of them to pay.

If you find that your annuity no longer fits your current needs, sell your annuity payments for cash. We will purchase your unwanted annuity and in exchange, will provide you with a lump sum paid in full! With our services, you won’t ever have to worry about losing your annuity money through the penalties of canceling your plan early. Why wait when you can have your money now?  

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Boost Your Retirement Savings With These 5 Tips

 

retirement-savingSaving for retirement can be difficult for many but it is definitely feasible with the right gameplan.

The following tips can help to put you on the right track towards retirement:

1. Invest in a 401k

It’s advisable to contribute to your 401(k) plan as soon as you are earning an income that will allow you to set aside money.

You should contribute to your 401(k) as soon as your financially able to.

In 2017, the maximum salary reduction contribution to a 401(k) plan is $18,000. You will be allowed to contribute an extra $6,000 to your savings if your 50th birthday is this year.

2. IRA Catch up Contributions

Regardless of whether you have a savings plan for retirement, alternative options are out there that can help you save money. Roth IRAs and IRAs can give you a huge start on saving for retirement. The minimum contribution is $5,500 and increases by $1,00 after age 50.

3. Simple IRA Catch up Contributions

If your company has a SIMPLE IRA, you can contribute a minimum of $12,500  in 2017 and once you are over 50 years old, you can contribute an additional $3,000. Annual adjustments are possible with basic and catch up contributions for SIMPLE IRAs

4. HSA Contributions

This type of contribution is great if you have a high-deductible health plan. This HSA allows you to contribute to a health savings account on a tax-deductible basis. The contribution depends on several factors and varies for every individual based on whether you have self-only coverage or not.

HSA contributions are perfect if you have a health care plan with a high deductible as you can contribute on a tax deductible bases. The contribution is dependant on a variety of factors, and differs for every person based on if  you only have coverage for yourself or not.

5. Social Security Benefits Delaying

At age 62, you can begin collecting social security benefits. You are able to increase the benefits of monthly coverage when you delay the benefits past full retirement.

For example, those at full retirement age (66) who chooses to delay the benefits until they turn 70, will notice an increase in their benefits by 132 percent 

While you are able to collect social security benefits at the age of 62, you can get more benefits if you postpone it til you are older. Delaying benefits til age 70 generally increases those benefits by over 100%.(Source).

 

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Not Saving Enough For Retirement Is The Regret of Many

saving for retirementThere are many things in life that change as we get older.

As we age, our needs, wants, and obligations alter and we eventually retire from our jobs. Although the concept of retirement sounds great, it may be nothing more than a pipe dream if you don’t have sufficient money to fund your it. 

Many people live with monetary anguish and wish that they had better money management skills in their younger years. Not saving for retirement is one of the biggest regrets that retirees deal with. Among Millennials, 11 percent are worried about not saving early enough for retirement while 18% among Gen X are worried about this same thing followed by 39 perfect of Baby Boomers (Source).

Saving Is Never a Bad Thing

Saving money isn’t easy and requires a great deal of discipline. By starting a retirement savings account early on in life, you will have a longer period of time to contribute.

Turning to others, such as family, for financial support can be difficult on both parties involved which is why having a decent savings account is essential in all stages of life, especially retirement.

Once you retire, there are other types of hurdles to overcome. You may have a variety of expenses such as: 

  • Medical bills
  • Assisted care costs
  • A mortgage
  • Cost of a spouse’s funeral
  • Any existing investments

While saving money for retirement is difficult for many, it can be impossible for some due to their salary. According to a recent study, 76 percent of Americans live paycheck to paycheck and 27 perfect of them have no savings at all (Source).

How to Start Saving For Retirement

It’s beneficial to start saving for old age as soon as you can, with the perfect age being your mid 20’s.

Putting aside as much as you can afford, whether that is $50, $100, or $300 a month, will drastically help when you are older. Many times, an employer will assist you with a 401 k match which will become accessible once you retire. Many times, the amount that you can contribute depends on your personal financial situation and you can only put in so much as bills and obligations get in the way.

In order to save, we must be in the mindset that it is not ‘option’, it is mandatory.

Starting to save is the hardest part but once you realize that is it essential to contribute to a savings and retirement account, it becomes easier to put that money aside each month. Remember that starting small is fine and any little bit counts. As your income increases, consider putting more into retirement in order to have a sufficient lump sum come retirement.

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The Common Issues Seniors Face After Retiring

issues-facing-seniorsLife in retirement should be all about relaxing and enjoying the time off you worked so hard to achieve. Unfortunately, many retirees are still faced with financial obstacles.

A study conducted by the CFPB reported that since its establishment, nearly 103,000 consumer complaints were received by those who were 62 years of age and up–from people who were retired. Here were some of the issues they were dealing with:

  • Scams and identity theft
  • Difficulties with reverse mortgages
  • Managing finances after the passing of a spouse
  • Uncertainty with banking charges and fees

Scams and Identity Theft

A common issue many seniors are faced with in their retirement stages are scams and identity theft and more specifically, recovering from them. Quite frequently, seniors are at the receiving end of scams and identity theft due to their vulnerability.

Especially in the case of seniors with Dementia or Alzheimers, many hackers, scammers, and identity thieves label seniors as an easy target. Due to this, seniors have trouble disputing credit card statements that list unauthorized payments. According to a CFPB report, many complaints about credit reports were mostly filed by seniors. Many complaints regarded the inability to rectify the errors on their credit reports in addition to disputing the purchases on their cards that were unauthorized. In many cases, the seniors would convey their concerns with not knowing the correct steps to take in avoiding these types of situations.

Reverse Mortgage Difficulties

A reverse mortgage is a loan specifically for homeowners that are 62 years old and up. It allows them to turn a portion of their home’s equity into cash, eliminating monthly mortgage payments.

In many cases, homeowners will be required to sell their home to the bank in order to attain a reverse mortgage. Since they are still residing in the home, they are required to continue property tax and homeowner’s insurance payments–something that many seniors have a difficult time remembering.

There have been many instances when homes would go into foreclosure due to the lack of payments made for taxes and insurance. Many seniors are under the false impression–due to insufficient explanation–that since the bank owns their home, they are not responsible for those monthly payments which, unfortunately, is not the case.

Another reason seniors have trouble paying taxes and insurance is because their monthly reverse mortgage payment is less than they expected it to be. Sometimes, reverse mortgages are a senior’s main income throughout their retirement, and if those monthly payments are too low, it will prove to be very difficult to keep up with their other bills.

AARP recommends that investing in a reverse mortgage should be considered as a last resort (Source).

Managing Finances After The Passing Of a Spouse

No matter the situation, losing a spouse not only creates an emotional burden but a financial one, too.

The CFPB has reported that many complaints filed are from seniors regarding difficulties with accessing accounts such as their savings, or having trouble locating the necessary documents in order to access these accounts.

Studies have also shown that many seniors who have lost a spouse and have a reverse mortgage face foreclosure because the agreement was in the deceased spouse’s name and loan services took too long to respond to their inquiries.

Uncertainty With Banking Fees & Charges

There have been many instances when seniors have filed complaints regarding an unfamiliar charge on their bank statements.

Quite often, seniors will spot subscription charges that they don’t recognize or recall signing up for. Studies have shown that a vast majority of seniors tend to sign up for ads they see on TV without reviewing over the fine print. Some services may be free for a limited time, but will automatically charge customers upon the conclusion of their free trial. This is something that is generally overlooked by seniors but causes the most confusion and disputes.

One other aspect of banking that seniors have shown difficulty understanding and have filed complaints to the CFPB about are the interest rates credit cards have.

 

It is strongly suggested that the families of seniors do their best to help their loved ones attain a better understanding of financial obligations. Educating your loved ones on topics of finance can help them steer clear of any potential scams and manage their accounts with ease.

 

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How To Avoid Common Financial Scams

avoiding-scamsIf there is one thing that we all try to avoid, it’s being scammed or ripped off.

What is truly troublesome is a scam that would ruin your future retirement and deplete all the money that you have contributed to it. Although we try to be diligent in detecting scammers, whether it is over the phone or via email, many of us still fall victim to it. When it comes to conmen trying to scam their next customer, they tend to target retirees and senior citizens as scammers know that this target audience tends to have a good amount of money in their savings accounts.

Nearly 1 in 5 Americans over the age of 65 have been victimized by financial rip-offs, according to a 2016 study from the Investor Protection Trust(Source).

“Swindlers and hackers pinched $16 billion from 12.7 million U.S. consumers in 2014”, according to Javelin Strategy & Research’s 2015 Identity Fraud Study (Source). That number is enough to want to take major initiatives to protect yourself, your family, and your bank accounts.

The Various Types of Fraud/Scams

When it comes to fraudulent activity, we often associate it with stolen money out of our bank account but there are other types of fraud that does not have to do directly with your bank account.

Contractor Fraud

When your home needs renovations and updates, we usually call a contractor to do the job. A reputable contractor has a habit of overcharging, leaving you paying more money than you should. Some signs that a contractor is trying to rip you off is:

  • Asking for money/cheque up front
  • Entering your house without your permission (to steal)
  • And trying to sell insurance claims to you

Medical Fraud

Sometimes, a doctor can try and lure you in in order to charge you more so that they themselves can benefit from Medicaid.

Other common types of fraud are: reverse mortgage, bereavement, and investment fraud.

Tips To Avoiding Scams

  • Never e-transfer or wire money to someone you don’t know
  • Never disclose your financial information/passwords/logins/pin numbers
  • Don’t open suspicious emails
  • Always use complicated passwords that only you know
  • Install anti-virus programs on your computer

Always be skeptical of who you trust and always try to choose a company that is listed with the Better Business Bureau.

You work hard to save for retirement, so why not do everything you can to ensure that it is safe? 

 

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A Simple Spreadsheet Can Be The First Step Towards Financial Freedom

spreadsheetFor many, early retirement seems like a just another pipe dream. Maybe if you threw in the words, ‘sole heir’ or ‘mega-million winner’ along with it, it would seem more plausible. We understand that money isn’t an issue for some people, but it is for the overwhelming majority. There are so many bills to organize and pay and when you add children into the mix, your expenses only get higher. With necessary expenses such as groceries, water, electric, college funds, cable, and more to consider, the prospects of retirement seem to get farther and farther away. However, early retirement is, in fact, doable and not nearly as difficult as one may think it to be. It all starts with tracking your spending.  

Keeping Tabs On Your Spending

Tracking your spending is the first step to early retirement and financial freedom. If you play your cards rights–instead of playing the lottery–and start tracking your spending religiously, you too will have the ability to save up sufficient funds that will allow you to attain financial independence and if you want, early retirement.

Every time you make a purchase or pay a bill, log it into your spreadsheet. Whether its for gas, groceries, the water bill, or a nice pair of shoes you couldn’t resist, make sure you enter it in your spreadsheet. If you really make the effort to do this, by the end of the year, you will know exactly what you have spent. From there, you can get a better idea of the kind of spending that needs to be reduced–restaurants, retail therapy, etc.–and determine how much you can live on each year.

Now here comes the tricky part, once you have come up with a reasonable number that will allow you to save and be financially comfortable, you must stick to that budget.

Just like most things, the first year is always the hardest, but once you get used to the system, you will eventually be able to find more ways to save. With clear and realistic retirement goals put into motion, make sure you have more than one saving account to keep your money–401K, health savings account, etc.

With the right mindset, financial freedom and early retirement is definitely possible.

 

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Some Seniors Are Being Victimized By Annuity Scams

senior-annuitiesAn annuity is a type of insurance investment that enables the investor to receive a fixed sum of money yearly, for the rest of their life. There are many different forms of annuities that provide customers with a range of benefits but also leave room for certain risks (i.e. stock investments). Annuities are very popular amongst senior citizens since they are primarily bought as form of income during the stages of their retirement.

An Unfortunate Target

Since seniors are prime candidates for annuities, it, unfortunately, makes them susceptible to felony fraud orchestrated by conmen who pose as reliable insurance agents.

For example, two Pennsylvania native sisters, Mary and Philomena Nave, who were in their upper 80’s at the time, had saved up $500,000 to supplement them through their retirement. When looking for a dependable insurance agency to invest their money with, the sisters came across Richard Piccinini Jr., an annuities salesman. Unbeknownst to them, the sisters were ultimately placing their money into the wrong hands. In a four-year span, Piccinini moved the sisters in and out of complicated, long-term contracts that would lead to astronomical commission fees. With constant early-surrender penalty fees, Piccinini was able to embezzle $200,000 of the sister’s $500,000 investment (Source).  

The idea of seniors being victimized by annuity salesmen is absolutely deplorable, but a sad reality. Deceptive agencies who are looking to make money off of uninformed customers are to blame for this. When the time comes to invest your money in annuities, it is highly important to conduct proper research before choosing a company. Sometimes, this burden can be eased with the help of family member who has your best interest in mind.

Sell Your Annuity or Structured Settlement With Rising Capital

At Rising Capital Associates, we can provide you with a lump sum for your annuity payments. If you need cash now for expenses, medical bills, or emergencies, contact us now for more information on selling your annuity payments.

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What Are The Different Types Of Annuities?

types-of-annuitesWhen annuities come to mind, many of us think of a monetary amount that is paid out in equal increments until the sum is completely depleted. Individuals may receive annuities for various reasons, whether it is a settlement for a car accident, investment of your funds distributed to you, or a lottery winning to name a few. 

Types of Annuities

Fixed Annuities

  • Fixed annuities are a result of fixed interest investments which are issued via insurance companies. They come with a guaranteed interest rate with the ability to defer income or draw income right away. 

Variable Annuities

  • Variable annuities allow customers to pick from a variety of investments. It then issues you a certain income during retirement which is depicted by the performance of the investments that you choose. If you happen to choose a very lucrative investment, the ROI will be high. With this riskiest annuity option, clients may lose some of their principal amounts.

Fixed-Indexed Annuities

  • Holders of fixed indexed annuities earn variable interest which fluctuates with the market index.

Immediate Annuities

  • Immediate annuity payments begin instantly and last until a specified date. With this type of annuity, the customer can give in their lump sum in exchange for annuities. These are purchasable from insurance companies who issues you annuities in the exchange for a lump sum payment.

Deferred Annuities

  • Deferred annuities are issued to the holder at a date that is postponed at least one year away.

Rising Capital Associates Purchases Annuities

At Rising Capital Associates, we purchase annuities and structured settlements for a lump sum in return. If you are considering selling all or just a portion of your annuity payments or structured settlement payments, contact us today for more information at 866-444-5061.

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What’s The Difference Between a Structured Settlement And An Annuity?

structured settlements vs annuitiesStructured settlements and annuities are two financial products that have many similar qualities in common. It is tempting to lump them together in the same category, however there are distinctions between the two that merit further investigation. 

Annuities

Annuities are financial instruments with qualities of both investments and insurance policies. They are a contract between an individual and an organization that provides for the repayment of a premium after a given time period has elapsed. Annuities date back to ancient Rome, where the first concept of this financial tool was introduced. “Annua” actually meant annual stipends in Latin. Individuals would give contributions into a large pool of money run by each province and then receive an annual payment each year until death, or for a specified period of time. This allowed the Roman Empire to mitigate risk while providing money to individuals of priority, such as soldiers and generals who often saw combat.

The first annuity on record comes from the American Colonial period in 1759 when the first organization was formed in order to sell financial protection to aging ministers and their families. Ministers would pay into a policy that grew over time. This money was then partitioned out to family members after a period of a few years. Essentially, it established a “safety net” where money now was sacrificed in terms of more stable, and larger amounts of money later. Annuities protected the ministers’ money from fluctuations in the financial markets and allowed them ways to pass their money over to children that were not yet old enough to know what to do with the inheritance.

The First Annuity Company Was Formed in 1812

The company was known as the Pennsylvania Company for Insurance on Lives and Granting Annuities/ Since 1812 various institutions have provided clients with a secure retirement plan.

Annuities In the Modern Era

One of the largest differences between annuities and structured settlements is that the former is guaranteed against the loss of principal while also deferring taxes. The current era of annuities began in 1952 with the establishment of the TIAA-CREF, the first offered group variable deferred annuity. Today, Americans own over $1.8 trillion in annuity products.

A great example of an annuity is a lottery winning. A lottery winner has a contract formerly drawn up with the party responsible for paying out the winnings. Typically the large winnings are separated over time and not put in as one large lump sum. Coincidentally, a lottery winner may elect to sell future payments to a broker in favor of a large lump sum.

Settlements

Settlements give out money in small portions, just like an annuity, yet they usually arise from a court settlement or personal injury case. The way structured settlements work out is that they arise from some legal claim, providing the winner of the case with a specific amount of capital for a fixed period of time. They are mostly the result of a lawsuit involving personal injury or liability.

Why Are Structured Settlements Used?

Structured settlements are used for large money claims where it is beneficial to pay our beneficiaries over longer periods of time. During the American Colonial era, governments wanted a secure way to ensure the recipients of a personal injury claim did not frivolously spend their money in a short period of time following their settlement payment and end up destitute, forced to rely on social services.

Settlements allow the government the ability to partition out payments over time, changing a large lump sum payment into a series of steady payments over time. They are useful for people who are temporarily or prematurely disabled, have limited financial expertise, or are minors that are not able to handle their own financial affairs.

The Settlement Market

The need for individuals to turn these small, steady, often decade-long payments into one large lump sum has created a secondary financial market for settlements. Organizations, such as Rising Capital exist that take deferral payments and convert them into one large cash payment. This way, individuals that are injured can pay large medical bills, or use them for other expenses that demand immediate attention.

Selling A Structured Settlement or Annuity

If you wish to sell structured settlements for cash or sell annuity payments for cash, contact us at Rising Capital Associates Settlements.

 

 

 

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Fee Based Annuities May Drive More People To Sell Them

fee-based-annuitiesA recent ruling from the Federal Department of Labor now holds broker-dealers and life insurance companies to the same fiduciary standards practiced in the financial industry. Annuity advisors are now required to disclose the commissions that they receive from selling products. This new fiduciary rule, outlined here, is requiring many institutions that deal in settlements and annuities to change their business model. Enter the fee-based variable annuity – which allows individuals to sell annuity payments in a slightly different way.

This increased regulation as a result of the Federal Department of Labor may lead to a resurgence in fee-based variable annuities. But what exactly are they? In this article we explore the difference between annuities and fixed-based annuities, and highlight some changes in store for the insurance industry in 2017.

What Are Annuities?

Before explaining what a fee-based annuity is, one must first understand what an annuity is. Annuities function like a reverse life insurance policy. In a life insurance policy, the policyholder pays small monthly payments that their family receives as a large lump sum after their passing. In an annuity the opposite happens: the policyholder gives money up front to an insurance company. The insurance company then pays the policyholder in periodic fixed payments until they die. Keep in mind you always have the option to sell your annuity for cash.

Annuities are insurance products. They act as a method of saving one’s money; essentially letting you protect it from yourself. By paying an initial lump sum to a company, and having non-taxed money incoming to you in small, fixed payments you are able to budget out your finances and have enough for retirement. Because annuities are insurance products there can be some tax advantages to the returns. When you sell annuity payments, they can be used as a way to buffer one’s income stream in retirement if an individual has no money saved up. Advances in medicine are causing individuals to live longer and longer, especially the Baby Boomer generation. Annuities provide a great hedge against outliving one’s own retirement savings while having one’s taxes deferred.

What Are Fee-Based Annuities?

Also referred to as I shares, fee-based annuities are a key part of a retirement portfolio. Fee-based annuities are simpler versions of traditional annuities. They contain no living benefits, complicated guarantees, or upfront loan and surrender charges. What is left is the main selling point of a traditional annuity: the ability to defer taxes.

The money you invest in an annuity grows tax-deferred until you eventually start to withdraw your funds. You are able to lock in a fixed monthly income without having to worry about financial market conditions.

The newly revived fee-based variable annuities offer a multitude of benefits over traditional annuities and variable annuities. Fee-based annuities offer shorter surrender periods, lower overall fees, and fewer penalties. Clients appreciate the fact that they are not locked into their annuity for a long time.

What Changed?

The new fiduciary rule requires businesses to disclose their commission rates to individual insurance holders that want to sell annuity payments. Insurance News Net reported that sales of variable annuities dipped 22% in the first half of the year. Contrariwise, fee-based annuities are making a comeback due to the recent Department of Labor ruling. The DoL created the fiduciary rule in order to operate with the client’s best interest in mind.

They may have been looked down upon by brokers and dealers a few years ago, as of 2011 the market stands at $1 billion. It is likely to increase as fee based annuities give new options for financial advisors, while also allowing consumers different ways to sell.

 

 

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