The flexible premium annuity is the insurance industry's basic IRA product and can be either fixed or variable. A fixed annuity has a guaranteed* maximum rate of return for the first one to five years and then a minimum rate of return once the guarantee term expires. Although returns may be lower than those of other investments they provide safety and stability and reasonable rates of return relative to their risk.
Variable annuities offer a choice of several different investment portfolios. The insurance company may include a bond or fixed-income fund, one or more common stock funds and a money-market fund. As with a mutual fund family, a participant can move from one fund to another fund without a transfer or a rollover. Variable annuities are subject to market risk which causes their value to fluctuate.
An IRA offered by an insurance company allows you to choose:
- protection of a guarantee of maintaining the account value of your deposits
- death benefit options
- automatic account management features, including the automatic rebalancing feature
Note: The above protections/options will cost you in the mortality and management fees charged by the insurance company.
Other advantages, dependent upon the fund you invest in, may include:
- no current income tax on earnings
- no minimums
- automated investment strategies
- protection against loss at death
- professional investment management
- easy telephone service
- income for life available
- access to your money-10% annual withdrawal provisions free from contract withdrawal charges
- no front-end sales charge
- free non-taxable transfers among funding choices
- required minimum distribution service
*Guarantees are subject to the claims paying ability of the underlying insurance companies.
MEA Financial Services offers all security products through Paradigm Equities, Inc., Member of FINRA and SIPC. Paradigm Equities, Inc. is the broker/dealer subsidiary of MEA Financial Services.
MEA Financial Services/Paradigm Equities, Inc. does not give tax or legal advice. The comments regarding the law and tax treatment simply reflect our understanding of current interpretations of such laws. Since laws are always subject to interpretation and possible changes, we recommend that you seek the counsel of an attorney, accountant or other qualified tax advisor regarding these matters as it applies to your particular situation.