NEVER INVEST IN AN ANNUITY!! You’ve seen this kind of headline in the financial pages or on pop-up ads on your computer. Or you’ve heard someone repeat what he’s heard from his buddy’s uncle’s investment planner.
An annuity is a tax-favored savings instrument. The government gives it special tax treatment because it’s designed for retirement income. An annuity can be qualified or non-qualified. A qualified annuity is funded with money that you have not yet paid taxes on, like an IRA. A non-qualified annuity is funded with money you’ve already paid the tax on; like money you take from your paycheck or out of your savings account. Either way, the tax on the growth of your Knights of Columbus annuity is deferred. You pay tax only later when you withdraw money.
An annuity is a is a great product in the right situation. In addition to tax deferred growth, here are a few more reasons why:
- The minimum interest rate is guaranteed for life. There is a floor that the interest rate will never drop below. The Knights of Columbus have always paid a higher current interest rate than the guaranteed interest rate. Nobody has ever lost a dime on a Knights of Columbus annuity.
- The principal is guaranteed by the Knights. This guarantee is only as good as the company backing it. We’ve had 40 plus years of Superior ratings from A. M. Best for financial strength.
- There are no administrative fees. 100% of your money earns interest from day one.
- Even though annuities are designed for long-term growth, after one year you can access 10% of the value without any penalty.
- Owners name a beneficiary so that at death the proceeds bypass probate. This saves time and usually saves money.
But an annuity is not right for everyone. It’s not a short-term product. It’s not designed to be a savings account where you stick money in and then take it out a short time later. There is an early withdrawal penalty over the first seven years if you take out more than the 10% free withdrawal. This is to encourage you to leave the money alone until retirement age. This applies to all annuities, not just KofC ones.
There are some situations where an annuity is not the proper product but there are many where it is. How do you know if an annuity is right for you? Meet with me and let’s look at your goals. It might be the perfect fit.
Where do you keep your safe money?