Annuities
What is an annuity and how does it work?
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Annuities are a contract between an individual and an organization where a series of fees are paid. These payments can be made on a one-time, monthly, quarterly, semiannual or annual basis to an insurance company which will pay income on that money.
This practice is used so that at a certain age, you can contribute and accumulate money to have a retirement plan and you can receive payments as long as you live.
Within annuities there are two phases; accumulation phase and annualization phase. The accumulation is the period in which a contribution is made to the insurance company, whether monthly, quarterly, semi-annually, annually and on a single basis (a single contribution or payment).
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During that period of time and according to the product selected, interest is honored or credited to the amount which generates growth within the accumulated value. Then in the annuitization phase, which generally occurs at retirement, you begin receiving a scheduled payment for the rest of your life. It is one of the tools used for retirement supplement.
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Why choose an Annuity with a CPR Agent?
Caribbean Professional Representative Corp. of Puerto Rico (CPR of PR) offers you consultations for different annuity products. Among the annuity alternatives we work with immediate, fixed and deferred annuities. According to your needs we analyze the best product to meet the client's needs.
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Below we explain the benefits of each of these options so you can have a better idea when you talk to your Authorized Agent to choose an Annuity.
Immediate Annuity
One of the main fears we face today is outliving our income. People are living longer than ever, and we all hope we are lucky enough to be part of that trend. But we are always haunted by the thought, "I can have an income today, what about tomorrow? Will my income last as long as I do?
With an immediate annuity, you can convert a lump sum into a steady stream of guaranteed annuity payments, providing guaranteed income for as long as you need it.
Since it's your money, you can direct the payments to a specific need. Like funding long-term care coverage or a family member's special education needs, you can also direct annuity payments to pay insurance premiums to ensure that valuable coverage is available when you need it.
You can even use annuity payments to make a gift to the organization or charity of your choice.
Indexed Annuity
A fixed annuity is a long-term retirement product that guarantees principal protection, offers tax-deferred growth on assets and a reliable income stream.
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Within this annuity, you have the flexibility to make additional premium payments if you wish. Over the life of the contract, the fixed indexed annuity can earn additional interest credits based on the growth of the capital index used over a one-year period.
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This type of annuity is not directly invested in the stock market, which eliminates the risk of direct investments in stocks. A fixed annuity cannot lose money due to the volatility of the index and the interest credited will never be less than zero.
Differed Annuity
As retirement approaches, you shift from accumulating assets to planning how to turn those assets into an income stream that will last as long as you live.
It can be difficult and frustrating to determine how to find the income to fund a new chapter in life. As retirement goals go, the paycheck disappears and you are responsible for creating cash flow that lasts as long as you and your spouse need it.
A deferred annuity provides you with tax-deferred growth for a period of time until the owner decides to take a withdrawal or stream of income from the annuity. A guaranteed interest rate is applied which It can be fixed, or fixed for one year at a time regardless of market risks.
Did you know?
Are there Taxes on Annuities?
Annuity benefit payments are a combination of principal and interest. They are taxed in a manner consistent with other types of income: the portion of the benefit payments that represent a return of principal or principal (contributions made by the annuitant of the annuity) are not taxable. The portion representing accrued interest is taxable. The result, over the period of benefit payments, is a tax-free return of the annuitant's investment and taxation of the balance.
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In the case of deferred annuities, they accumulate interest earnings on a tax-deferred basis. While no taxes are imposed on the annuity during the accumulation phase, taxes are imposed when the contract begins to pay its benefits.
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To discourage the use of deferred annuities as short-term investments, the Internal Revenue Code imposes a penalty (as well as taxes) on early withdrawals (and loans) from annuities. Partial withdrawals are first treated as income gains (and are thus taxable as ordinary income); only after all gains have been taxed are withdrawals treated as return of principal.
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Note to the interested party:
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CPR of PR is dedicated to offer individual consultations only to that interested client in order to show what alternatives they can count on, based on the client's budget and personal situation.
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We will never choose or tell the client which product to select. This evaluation and decision is entirely up to the client and it is a very personal one after receiving orientation for their consultation.
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We are not financial analysts, which is why we always recommend that you consult your accountant if you have any questions regarding your financial status.
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Dirección postal
​​HC-04 Box 15644
Carolina, PR 00987
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Golden Valley
Calle Principal #644
Carolina, PR 00987