Annuities Basics

Everything you need to know to make annuities part of your compensation package

Annuities basics cover what an annuity is and how to purchase the best plan. Annuities are policies in which you put money and when you retire, the policy then pays you an income. The trick is picking the correct payment structure and compensation plan. Variable annuities have the potential to pay out much higher but they can also drop in value. Fixed annuities as the name implies guarantees a certain rate of payment.

Choose a lump sum distribution or have the annuity pay over time. If you pay over time, then you can pick a certain period to receive the annuity, called period certain. Of course, the payments will be less but the policy covers your employee for the period picked, even if he dies during that time. Picking the lifetime of the annuitant guarantees payment during that person's life. Alternatively, pick lifetime of annuitant and spouse to cover both spouses. Look for the following annuities basics:

1. Choose lump sum payments or pay over time into the annuity with payroll deduction.

2. Select the terms of the annuity payment.

3. Check annuity rates and maintenance fees for the plan.

 

Pick annuity companies that offer diverse plans

Your employees have different needs, so choose companies that offer some choice in the plans they offer. Find out if you can change the plan during the term, since circumstances change, and offer the best plans to your employees.
Try: MetLife offers annuity programs for any employee regardless of how near or far from retirement. Add this benefit to your employee bundle for your employee's future peace of mind. Protective offers many different kinds of annuities including fixed rate, variable and immediate, so you can provide the best selection for your employees.

Get annuities information to find the best terms for your employees

Some employees will need a lifetime of payments to support them throughout retirement. Others will need a lump sum distribution to pay off debts before beginning retirement. Still others are concerned about the welfare of the spouse and children. Pick a plan that addresses all of these needs.
Try: Ameriprise offers annuity programs that offer either a lump sum payout or payment for the term you choose. Take it for life or a period of time such as 20 years. Mass Mutual offers various annuity products and provides calculators to determine how much money you will need at retirement and how much a certain investment will provide at retirement. Use these tools to let your employees make informed decisions about their benefits package.

Find the best annuity quotes with the highest interest rate and lowest service charge

Annuities can vary from company to company and fund to fund so look at what the fund is paying. The company handling the annuity will charge a service charge and a maintenance fee to maintain the account. Shop around for the best deals in annuities.
Try: Vanguard offers a tax deferred rate, which is good for up to five years for a certain product. Ask the representative to explain their fixed and tax deferred annuity plans for a full disclosure of the fees and interest rates. John Hancock offers several annuity options with flexible terms. They list their charges on the webpage and they offer liquid accounts in case your employee needs to withdraw funds prematurely. This factor can be very important, since there is no early withdraw penalty after just a few years.

 

• Before you add retirement annuities to your list of benefits, ask for a prospectus and read it carefully. Make sure you also distribute the prospectus to your employees so they are knowledgeable about their plan.

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