Demystifying Annuity Values

A guide to Current Value, Benefit Base, Surrender Value, and Death Benefit

In the Complex world of retirement planning, annuities often take center stage.? But navigating their Jargon can be daunting.? Fear not, intrepid investor!? This article sheds light on the four key terms: current value, benefit base, surrender value, and death benefit, empowering you to make informed decisions about your financial future.

Current Value: Imagine your annuity as a living breathing entity (figuratively, of course!)? Its current value represents its net worth on any given moment.? Think of it as the price you’d fetch if you sold it to an insurance company today.? This value Fluctuates with factors like interest rates, market performance, and the specific terms of your annuity.

Benefit Base: Now, picture the underlying foundation of your annuity, the bedrock on which your income payments are built.? That’s the benefit base.? It is typically determined by the amount you invested initially, plus any accumulated interest or gains, minus any payouts you’ve already received.

Surrender Value: Life throws curveballs, and sometimes you might need the cash out of your annuity before the agreed-upon terms.? This is where surrender value comes in.? It’s the amount you’d receive if you decided to cancel your annuity early.? However, be prepared for potential penalties, which can significantly reduce the payout, especially in the early years.? Remember, early surrender should be a last resort!

Death Benefits: Let’s acknowledge the inevitable – no one lives forever.? The death benefit kicks in when you reach the pearly gates, providing the payout to your designated beneficiaries.? This can be a valuable tool for financial security, ensuring your loved ones aren’t left financially stranded.

Let’s break down the interplay between these values:

• Current value typically tracks the benefit base but can deviate due to market fluctuations and other factors.
• Surrender Value is usually a percentage of the benefit base, with the penalty percentage decreasing as the annuity term progresses.
• Death benefit is often a guaranteed amount or multiple of the benefit base, offering peace of mind for your beneficiaries.

Remember, understanding these values is crucial for making informed choices about your annuity.? Consult a financial advisor to decipher the specifics of your individual contract and ensure your annuity aligns with your goals and risk tolerance.

In conclusion, navigating the intricacies of annuities can be empowering with the right knowledge.? By Understanding the nuances of current value, benefit base, surrender value, and death benefit, you’ll be equipped to make informed decisions that pave the way for a more comfortable retirement.? Remember, knowledge is power, and informed choices lead to brighter financial futures.

BONUS TIPS:

• Inflation was not a big part of our vocabulary until Covid came around and prices started to increase.? Not all annuities’ payouts will adjust with inflation.? So, although it is a secure way to create an income stream, it does lock in specific terms of when you can access your own money.
• Due to this fact, different companies may limit the amount of money you can put into this type of product.? Some may be as low high as 35%, whereas others may have no limitations.? This is due to liquidity and the internal costs of the products themselves.
• If you are looking to get out of a contract, there may be tax consequences, so talking to your tax preparer might be an important piece of the puzzle to not be surprised when you file for the year any changes are made.? However, changes between products MAY alleviate the burden, this process called a 1035 exchange.? Because your funds are staying within the tax-sheltered status of the products, exchanges are allowed, however any penalties for early withdrawals may still take effect.

??????? I like to simplify annuities as such.? Your Income can do four things once the paychecks stop:?Go up, go down, stay the same, or run out.? What an annuity does in most cases is eliminate two of those possibilities.? The annuity/insurance company will take a small percentage of the funds to provide these guarantees.

?With personal service,

Zachary Bass

?My Online Scheduler

Securities offered through?Osaic Wealth, Inc.?member FINRA/SIPC.?Osaic Wealth?is separately owned and other entities and/or marketing names, products or services referenced here are independent of?Osaic Wealth.? Wealth Management Resource Group is independently owned and operated.