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Annuity experts? Can any of you explain this to me?
Old 11-15-2015, 11:36 AM   #1
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Annuity experts? Can any of you explain this to me?

Many years ago, before we met, and before we knew anything about the heck we were doing with money my wife bought an annuity. She just received her annual report and this is the irst time I have given it any attention. And I'll be darned if I can figure out what tis is or what it does.

It's called a Flexible Premium Deferred Annuity-Market Choice from North American Company for Life and Health (NACOLAH)

It has a Surrender Value and a slightly higher Death Benefit

What are our options?
How and when does this pay out short of death? I can't tell from this report. About a third of it's surrender value is Interest and Index Credits. It is 100% Fixed Income investment. And is Annuity type-”Non- Qualified" whatever that means.

I tried Finding info on these boards and the Internet in general and am not getting any clarity.
This forum is always loaded with smart helpful people. Anybody have some insight they could share?

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Old 11-15-2015, 01:05 PM   #2
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While I can't figure out exactly without the paperwork in front of me, it SOUNDS like it's essentially the "CD-like" fixed annuity that many insurance companies (both for-profit and non-profit/mutual) insurance companies offer.

Basically, you put in an amount of money, and they credit it with interest every quarter/year. It has surrender charges for the first X years.

It's "non-qualified" because you put in after-tax dollars into it initially. Therefore, only the interest is taxable upon withdrawal.

An annuity typically is tax-deferred until (I think) 59.5. After age 59.5, you can withdraw the interest and/or principal, and pay taxes on interest withdrawn. Of course, that is ignoring any applicable surrender charges (if applicable).

I have a fixed annuity like this with a mutual Fraternal Benefit Society that paid a decent interest at the time I bought it about 7 years ago. Rates have since dropped, but I will hold it until I turn 59.5, then see what my options are. If I were in the market for fixed income, I would definitely survey some well-rated annuity companies to see what they offer for a 5-10 year term, since many of them offer rates more attractive than bank CDs, with just (IMO) a slightly higher degree of risk.

The flexible premium means you can contribute additional money into it to earn interest.

Most annuities are 'covered' by up to $100,000 through your state insurance board. Meaning, if an insurer went belly-up, the state fund that all insurers pay into (like the FDIC funded by bank premiums) would attempt to pay you back up to $100,000 in coverage out of the state's annuity funds.

I can't speak of the death benefit, since each insurance company and each insurer's product are different.

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Old 11-15-2015, 01:11 PM   #3
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Thanks, that is very helpful!

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Old 11-15-2015, 01:16 PM   #4
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And I'll be darned if I can figure out what tis is or what it does.
You are not supposed to be able to figure it out. It is your job just to sit down and be quiet while you continue to (hopefully) make contributions.
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Old 11-15-2015, 01:31 PM   #5
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I have a flexible annuity and if I chose to, I can withdraw 10% of it each year without penalty. It pays better than a savings account and most CDs. They gave a 2% bonus for any funds deposited the first year. No fees for it, just the surrender charges for the first 7 years.

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Old 11-15-2015, 04:21 PM   #6
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Your wife should have a contract. Words like "Index Credits" will be defined there. It should also explain the death benefit.

I'm guessing this isn't a straight guaranteed interest product (like a CD) but includes the possibility of some additional interest tied to some index, just because of the word "index" above. But, that's a guess.

You can keep it, surrender it, or roll it over. Eventually, you could turn it into a monthly income.

It seems there should be some rates on the annual report. If she has saved prior year's annual reports, you can compare the growth in the surrender benefit between consecutive years.

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