D.C. MYGA Annuities for all residents living in Washington D.C.
In addition to the benefits of tax deferral, your choice of payment options, and exemption from probate and creditors, fixed annuities usually pay higher rates of interest than Bank CDs or other traditional guaranteed instruments. As you would suspect, savvy and informed investors look to these contracts to achieve a slightly superior rate of growth. Some benefits are:
As with all other types of annuities, MYGA annuities usually contain a schedule of declining surrender charges, stated in the contract beyond the 10% early distribution penalty levied by the IRS if it is qualified contract. Non Qualified contracts do not have this penalty, but interest earned if withdrawn is considered income and taxable. This charge gradually decreases by a percent or two each year until it is gone.
As an example, a 10 year MYGA annuity contract may charge a 6% penalty for any funds you take out within a year of purchasing the contract, a 5% penalty for anything withdrawn in the second year, and so on until the surrender charge schedule expires completely. But many contracts let you withdraw anywhere from 10% to 20% of the value of the contract every year with no penalty, providing some liquidity options.
Beneficiaries have several payout options to choose from, including:
As long as you don’t withdraw your funds before you turn 59.5 for qualified annuities, the cash you invest in a fixed income annuity contract grows tax-deferred until you start taking distributions. Once you start collecting, the IRS will tax your payments the same way they would any other income. Non qualified plans disburse on a LIFO basis so the last in is the first out and treated that way for tax purposes. The tax rate is determined using a formula called the exclusion ratio, which distinguishes taxable income from tax-free income. You’ll get your principal back tax-free, but income and interest earned are taxable.
The principal and interest in a fixed contract is backed by the financial strength of the life insurance carrier offering the product. Insurance companies are rated according to their financial strength and given a grade, such as AAA or AA. Most carriers have several ratings provided by each of the major rating agencies, such as Moody’s, Fitch, and Standard and Poor’s. Stable carriers obviously receive higher ratings, while smaller, less established companies are assigned lower grades. We do have restrictions on the annuities we offer, we will not offer and annuity from a company that is rated BBB or lower.
But state laws require that all fixed annuity carriers maintain a cash reserve that is at least equivalent to the total value of all outstanding fixed annuity contracts, regardless of what they are rated. This provides a safety net for all fixed annuity holders that can be counted on in times of financial turmoil similar to 2008. Reinsurance companies usually step in and cover customer losses whenever an annuity carrier becomes insolvent. Although fixed annuities are not FDIC Insured your chances of losing the money in one of these contracts are so low that this possibility can be ignored for all practical investment purposes.
A multi year guaranteed annuity is a contract between you and an insurance company. It is useful for individuals who want guaranteed interest rates and a stream of income they can’t outlive. Here are some of the ways a multi year guaranteed annuity can ultimately help you eliminate unwanted financial surprises: