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Deferred annuities possess characteristics found nowhere else. They play an important part in seniors’ portfolios.

Seniors hold billions of dollars in deferred annuities. However, my experience is that the average person knows little about the unique advantages of deferred annuities, much less the options they have during the holding period.

When you mention the term, “annuity”, it typically conjures up thoughts of getting a small check in the mail every month from some insurance company. It is viewed as an income.

The vast majority, however, of annuities are of the “deferred annuity” variety. They are accounts designed to grow money over a period of time in a safe environment. Over 90% of deferred annuities are never “annuitized”, that is, converted to that monthly check in the mail.

So let’s take a look at some of the attributes of annuities and, in the process, clear up many misunderstandings about this vehicle.

Tax Deferred Earnings

Deferred annuities provide “triple compound interest.” There is interest on principal, interest on interest and interest on the taxes you would have paid on an investment in a non-tax deferred environment.

For example, 6% which is taxable is equivalent to an 8% non-taxed return assuming a combined federal and state tax bracket of 25%.

Safety

While deferred annuities are not FDIC insured, like a CD with a bank, they are backed by the generally billions of dollars of the insurance company’s assets. No big risks here.

A Competitive Interest Rate

Insurance companies normally set the interest rate for a deferred annuity contract annually. You will find that it is usually one to two points above CD rates. So not only do you get a higher rate but the interest is tax-deferred, unlike a CD where you pay taxes on the interest each year.

Some deferred annuities offer a rate that is guaranteed for a number of years, such as five. If you think interest rates will fall, you can lock in today’s rate.

Minimum Interest Guarantee

When you get to the end of your annuity time frame, if your annuity has not given you at least a minimum of (generally) 3% interest per year, then the insurance company will apply their minimum guaranteed rate. Nothing to get excited about, but at least you know that you can’t lose money and there is a minimum interest rate that is guaranteed no matter what.

No Sales Charges

When you move money into a deferred annuity, 100% of the money goes to work for you from day one. There are no sales charges subtracted from your initial deposit.

No Annual Administration Fees

Some places to park money, like mutual funds, may have fees attached to the administration of the fund. Not so with deferred annuities.

Withdrawal Privileges

This is a source of major misunderstanding. Many people do not realize that their money is not as tied up as they think; there are a number of ways to access funds without surrender charge penalties.

1. First, there is the 10% annual free withdrawal privilege. Each year you can take out up to 10% of your account value free of any penalties.

2. If you ever need to go into a nursing home, most insurance companies will allow you to take out whatever you need with no penalty.

3. If your doctor diagnoses you with a terminal illness, you typically can take out any amount penalty free.

4. You can convert all, or a portion, to a guaranteed income. This can be for your life, your life plus another (i.e. husband and wife) or for a set number of years.

5. There are a handful of new products on the market which will set you up with a pay out at a guaranteed interest rate for the rest of your life, but also allow you to retain control of the principal. In other words, the annuity is never “annuitized.”

The interest rate is typically a function of your age. For example, if you are 65, the interest rate is 5%; 70 would be 6%; 75 pays 7%.

Free of Probate

This feature will vary by state, but in those states in which this feature is applied, an annuity is not included as a probate asset. Hence it is free of any probate fees or any delays in passing the funds to your beneficiaries. The normal requirement, however, is that the annuity must have a named beneficiary.

Free From Creditors

Again, this will vary from state to state. If you live in a state where this applies, this is added peace of mind that the money in your deferred annuity is safe in the event of a financial reversal.

Surrender Charges

Folks who object to deferred annuities usually bring up the fact that there are surrender charges that make getting their hands on the money costly. To a certain degree this is true. In order for the insurance company to go on the hook for the guarantees in the contract, they need to put some strings on accessing the funds.

However, these surrender charges decrease over time. Eventually they disappear altogether. In addition, after you have held your contract for a certain number of years (five is typical), you can take all or some of the money out over a five (sometimes ten) year period with no surrender charges.

The bottom line is that the surrender charge issue can be circumvented in a number of instances. Remember, deferred annuities are longer term scenarios. You certainly wouldn’t want to put emergency fund money or money you are going to use to buy a new car in two years into a deferred annuity contract to begin with.

So there you have it. Ten features of a deferred annuity, which will add to your understanding of this product.

Robert D. Cavanaugh, CLU is a 36-year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. For cutting-edge, easy-to-understand financial planning resources and techniques to increase your income, reduce taxes and preserve your estate and to claim the free video, “How to Sell Your Life Insurance Policy for More than the Cash Value”, go to theestatepreservationadvisor.com/rd/subscribe.htm theestatepreservationadvisor.com/rd/subscribe.htm

This may come as a surprise but if you only ever pay the minimum repayment on your credit card it will take you over 20 years to get out of credit card debt.

Borrowing long term on a credit card not a sensible way of managing money but millions of card holders are doing it every month. Here are seven ways to help you get out of credit card debt fast.

1. Don’t use credit cards to buy everyday things.

In the past I, like many people, have bought my monthly shopping and paid utility bills on my credit card. At the end of the month instead of clearing the balance I’ve paid the minimum or maybe just a little bit more.

Six months later I’m still paying for groceries that were consumed months earlier and instead of working to get out of credit card debt I’m getting deeper and deeper into debt.

Credit cards should only be used to purchase occasional higher value goods and not day to day living expenses. Unless you have sufficient funds to completely clear the bill when it arrives, pay with cash. You will never get out of credit card debt if you use the card for day to day expenses.

2. If you are able to pay off your credit card out of savings do so.

With interest rates on savings as low as they are at present it makes no sense to pay 12 to 18% on a credit card so you can earn 3 to 5% on your savings. If you can, get out of credit card debt today by paying the bill in full.

3. Draw up a budget plan.

If you cannot pay the account in full then it’s time to draw up a budget plan to get out of credit card debt as soon as possible.

A budget plan is a simple income and expenses statement for the week or month. It enables you to work out how much money you have spare each. From this work out how much you can afford to pay off your credit card bills. If necessary work extra hours and use the income to reduce the bill quickly.

4. Switch the balance with a 0% Balance Transfer

To help you to get out of credit card debt quickly move your balances to a new card offering 0% balance transfers. Then pay your budgeted amount to reduce the balance as much as possible within the 0% period. This way every dollar reduces the bill.

At the moment there are some cards still offering 0% without a balance transfer fee but I suspect these will disappear soon. Apply for these, if available, otherwise you may have to pay the 2 to 3% balance transfer fee.

5. Take out an Unsecured Personal Consolidation Loan

If after budgeting you are only able to pay the minimum, or just a little bit more, you may have to consider an unsecured consolidation loan to immediately get out of credit card debt.

Take out an unsecured loan as this will not put your home at risk. Currently is it possible to get some very good rates on unsecured loans so shop around.

Set the repayment term as short as possible and cut up your credit cards to avoid being tempted again.

6. Consider a Secured Personal Consolidation Loan

If you own your own property then the bank or lender may insist on a secured consolidation loan.

A secured consolidation loan simply means that you have to put up your property as security for the loan. The bank can, if you fail to make the payments, take possession of your home and sell it to get their money back.

Using secured consolidation loans to get out of credit card debt is not generally advisable. The interest rate will probably be no less, and is often higher, than the unsecured loan but your home is at risk.

7 . Refinance your mortgage

If you own your own home you may be able to refinance the loan (re-mortgage) for a higher amount and use the surplus to get out of credit card debt.

In many ways this seems an attractive proposition as interest rates are very low at present. If there is sufficient equity (value in excess of your borrowings) in your home your existing mortgage lender or another lender will lend additional funds.

If you can avoid this option I would recommend not to take it as you are converting short term debt to a long term mortgage and your home is at risk.

In the end you will pay more however, if the choice is between continuing with your credit cards with their high interest payments or a re-financing of your home, then the re-financing is an option.

Credit cards are one of the most expensive forms of debt and banks and other lenders are making billions every year from individuals with credit cards.

If you must have a credit card, and I confess I still have one, then use it only for exceptional purchases that can be repaid within a few months.

Don’t use your credit cards for day to day living expenses, do your budgeting and help yourself get out of credit card debt.

John has worked for many years in Insurance and Finance. He now writes on a number of topics including Credit Card Debt. For more articles on managing credit cards go to card-debt.net Credit Card Debt.

All of us stand in need of some constructive and sound finance advice from time to time. When we need some counsel on how to deal with a given financial matter, there are several resources that we can go to and get some reliable responses. Here are some suggestions of where you can seek out advice on finances when you need it.

Depending on the nature of the question you have, you may be able to discuss it with a trusted friend or family member who is known to do well with financial decisions. The advantage to approaching a loved one is that the individual will have a better understanding of your character and personality traits than someone who does not know you well. To some extent, this knowledge may impact which option would be in your best interest long term. If you know someone who does very well with managing their resources and you can trust them to keep your confidence, then this might be the idea route to go.

Of course, you may not wish to involve friends and family members in a discussion about your finances. That is perfectly understandable in many cases. If you would feel more comfortable talking with someone not connected to your circle, then you may want to seek out a professional financial advisor. One example of the kind of professional that may be able to help you is your banker. Generally, banks are quite good about laying out the advantages and disadvantages of making a particular financial decision within the context of a given situation. While your banker probably does not have a strong understanding of your personality, he or she can provide you with some sound finance advice that you can then evaluate and use as you see fit.

Another avenue for obtaining some quality finance advice would be to speak with a debt counselor. Part of what many of these agencies do is teach people the basics of developing and sticking to a realistic budget. There is a very good chance that a debt counselor can ask you some questions that will help you to think through the ramifications of various options, thus making it easier to arrive at the solution that would work best within your circumstances. Some communities provide this type of support to citizens at no charge whatsoever, while in other locales there may be a small charge for the counseling session.

James Woodley is the writer for the website finance.webinfo-site.com finance.webinfo-site.com. Please visit for information on all things concerned with webinfo-site.com/finance/Articles/Finance_Advice.php Finance Advice