Investment Planning
Basics of Investment Planning
investment plans
In today’s current investment markets, there has been an increase in the number of individuals deciding and adhering to an investment plan. Many families are looking for investments plans which help them build two funds – one for the future and one for the present.
Investment plans essential allow the an investor to buy a set number of stocks, bonds, and securities. Funds for the investment are taking directly from a check, savings, or money market accounts automatically. These money is used to buy stocks and bonds that were pre-decided upon. There may be fees associated with changes. The next important step in an investment plan is figure out how much money you would like to invest.
Due to the long term nature of investment plans, you would suffer a financial lost if you had pull out early because you invested more money then you could afford. If you do feel you are at point where you can not no longer make a regular investment more investment companies will allow you to reduce or hold the next schedule investment.
Annuities Investment Planning
Basically, an annuity is a contract between you and the insurance company that provided for tax-deferred earnings.
There are a number of insurance guarantees that come with annuities, including the option to “annuitize,” or turn the principal into a lifetime stream of income. The FDIC does not insure annuities, even if they are sold through a bank.
Fixed-rate annuities
With a fixed-rate annuity, you pay the insurance company a certain amount of money. The insurance company then guarantees you a certain periodic payment for the life of the annuity. There are often higher interest rates on annuities than on CDs. With a CD, the rate is fixed for the full term of the CD. Fixed-rate annuities do not have a maturity date. There may be penalties charged if you withdraw money during the penalty period. You may have to pay an 8% penalty if you withdraw money during the first year. Annuities have tax-deferred features, so if you withdraw money before the age of 59 ½, you may have to pay a hefty 10% penalty to the IRS. The earnings on annuities are taxed as ordinary income by the IRS no matter how long you have invested.
Variable annuities
Variable annuities offer investors unique features, but they are quite complicated. They combine the elements of life insurance, mutual funds and tax-deferred savings planes. When you invest in a variable annuity, you select from a list of mutual funds to place your investment dollars. Your options may include balanced mutual funds, money market funds and several international funds.
Variable annuities have tax-deferred benefits, and they have income guarantees that you don’t find in other investments. For example, for a fee, your variable annuity will pay a death benefit.
You invest $100,000 in a variable annuity. Taxes are imposed in the same manner as for fixed-rate annuities. The earnings are taxed as ordinary income. If you’ve already reached the limit on your other retirement savings vehicles, you might look into a variable annuity.
CD-type annuities
A CD annuity is a fixed-rate annuity with a guaranteed rate that matches the penalty period. For example, you buy a five year CD annuity at 4%. If rates rise, you are already locked in at the lower rate.
Insurance companies developed CD annuities to help prevent insurers from making empty promises to continue to pay a high interest rate after the guaranteed period. There are usually higher interest rates offered on CD annuities than on traditional CDs. The surrender charges for a CD-type annuity are similar to those of fixed-rate annuities. Some CD annuities have escape clauses in which the company penalty is waived if the customer allows the payments to be made over a five-year period or longer.
