Pension Annuity

In the United States, IRS' Publication 939 differentiates between pension and annuity for the purpose of calculating taxes. According to it, pension is regular payment received by a taxpayer from former employer, after retirement for services rendered in past, while annuity is something taxpayer voluntarily contracts for. However, the employer may help employees in selecting and managing such contracts. Annuities are paid annually and for more than one year. There are different types annuities, such as fixed period annuities, variable annuities, annuities for a single life, or joint and survivor annuities. 

While in employment, employees without defined benefit, i.e., without salary related pensions, contribute regularly to some annuity pension plans. At the time of retiring, the employee may have a choice to receive either pension annuity or lump sum from these pension plans. The employee can shop around for suitable pension annuity rates, and use the lump sum received under the plan for purchasing suitable pension annuity income. Alternately, the employee may invest lump sum in any life annuity pension plan and choose to receive regular income from it. Pension plans are offered by insurance companies and are used for retirement planning. Employers' contribution towards employees' pension also goes into pension and annuity funds with the insurance company. This is used to purchase annuity for the employee at the time the employee retires. 

There are some tax credits associated with pension and annuity income, as well as contribution towards pension annuity plans. Pension annuities in UK are classified into four different types, the personal pension, the occupational/company pension, the stakeholder pension, and the State Pension. Taxpayers without defined benefits can enter into contracts with a pension provider for personal pension. The employer contributes towards occupational pensions in UK. Stakeholder pensions are quite like personal pensions, but here there is some flexibility built in to enable people with moderate incomes purchase such pension plans. State Pensions are given by the government, but are rarely enough because of which it becomes necessary to purchase other types of personal pensions.

In the United States, any payments towards annuity, and pension are subject to some federal income tax withholding which is nothing but tax deducted at source. A certificate for pension or annuity is issued to the taxpayer for any tax withholdings. Taxpayer can choose not to have such deductions, or have lesser income tax withheld. In such cases, the taxpayer is required to pay an estimated amount of tax. 

Two methods are used in the United States to identify how much of annuity is tax-free and how much is taxable. General rule is one of them, and the other method is explained in IRS' Publication 575. General rule is applicable only to annuity payments under non-qualified plans, and to those qualified plans that were taken before November 19, 1996. Publication 939 defines a non-qualified employee plan as the one that does not conform to the Internal Revenue Code. Some employers do have such plans, which do not entitle their employees to most of the tax benefits associated with qualified plans.

Such method of identification of taxable and tax-free components of annuity under General Rule is also applicable to guaranteed annuity payments to people who are 75 or older, provided there are five more years of such guaranteed payments remaining. The General rule is not applicable on qualified employee plan, qualified employee annuity and tax-sheltered annuities, provided the starting date of these annuities is later than November 18, 1996. Annuity worksheets allow the taxpayer to identify the part of the annuity that is taxable. The Simplified Method under Publication 575 is applicable in all other cases where General Rule is not applicable for identification of taxable component from annuities. Form 1040 Line 16 is used to report Pension and Annuity incomes and taxable components. Relevant information is to be filled from 1099-R from all sources.

Understanding And Calculating The Future Value Of An Annuity

An annuity is a regular payment that received in exchange for a lump sum of money invested with a financial institution (usually insurance companies) or an investment that is made over a period of time (usually many years). People purchase an annuity by entering into a contract and paying over a proportion of their income for a number of years, usually 10 years or more.

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When you have made all the payments that you are required to make under the contract that you have entered into with the financial company, you begin to receive regular payments (the contract becomes ‘annuitized’) or you receive a lump sum. This is called a deferred annuity, and people choose such annuities in order to take care of their financial needs when they retire, or to pay for their children’s college education etc.

structured settlement

You need to know what your annuity is going to be worth in the future. There are several reasons for this. In order to make sure that there will be enough money to take care of future needs, careful financial planning needs to be carried out so that the amount of money required can be determined. How much will you need for your retirement, for the kid’s education etc.? Once you are satisfied that you know what you will need, you then need to set up an annuity which has a future value that will meet those needs.

Another reason you need to know the future value of an annuity is that you may decide to sell your annuity at some stage. You may decide that you want to get cash for some, or all, of your annuity so that you can make a better investment, or there may be some other financial emergency that arises (e.g. medical bills).

If you become the beneficiary of someone else’s annuity – you might inherit an annuity – you might also decide to sell it. The future value of the annuity will have an effect on its present value. It’s a bit like selling an asset such as a house; if the value of the house is expected to grow, this will affect its present value.

It is difficult to determine exactly what your annuity will be worth because of inflation and other factors, but it is possible to come up with a reasonable approximation. As you will see, there is a standard formula for establishing the value that is more or less universally agreed upon.

Inflation will affect the value of the money you receive, and in an effort to compensate for the loss of value inflation can cause, some people choose a variable annuity in place of the more secure fixed annuity. Variable annuities often yield a greater return, but there is some risk involved.

When determining the value of money in the future, we must take an economic principle called the time value of money into consideration. The value of money changes over time. If money is not invested it will lose its value due to inflation, but if you invest it, its value will grow or at least be maintained.

This simple example illustrates the principle: If you can get 6% interest on $100 and you invest it today for one year, in a year’s time your $100 will actually be worth $106 – $106 is the future value of $100 (this simple example does not take inflation into account, we will deal with that later). This calculation is also referred to as a capitalization.

Working out the future value of an annuity takes the time value of money into account, and it includes factors such as the number of deposits/contributions, the length of time contributions were made, and the interest rates. Economists have developed an algebraic formula for the calculation.

The formula FV = R x [(1+i)n - 1] / i is used to calculate the future value of an annuity. An additional factor - (1+i) is added to the formula where contributions are made at the beginning of periods. Thankfully you do not need to be a mathematician to work it out. There are many calculators which are made available online by various institutions, and all you have to do is enter your monthly contribution rate, the time length of the investment, and the real interest rate.

The real interest rate is the interest rate minus the inflation rate. Obviously these factors are variable, and that’s why is difficult to arrive at a very precise figure. In addition, you need to account for any fees to be paid, and of course, there is tax to take into consideration. The amount of tax depends on whether you used pre-tax income to buy the annuity or income that you had already paid tax on.

Nevertheless, it is possible to work out what the future value of your annuity is to a reasonable degree, and it is something that you must do in order to plan ahead and to make sound financial decisions. Why not visit the websites of Pacific Life, ING, Midland and others and use the calculators that they provide? Make an appointment with a financial advisor with expertise in this area too.

Sell Structured Settlement Payment

The responsibility to sell structured settlement payment packages is quite a lucrative task to take. Besides the fact that the simplest responsibility you need to take is talking, you would be compensated well through the commissions that you would receive upon making sale. However, coming up with the actual effective approaches that you need to be successful in this field of marketing and sales business, you should know the basic techniques that you need to be able to find the most effective process to entice your prospect buyers into buying your premium policies.

Insurances are of course not that easy to sell. The option to sell structured settlement payment is of course in need of proper skills that would allow the chance for one to close deals that would benefit both the original owners of insurance policies and the new owners of the insurance packages. Basically, this practical way of serving as the link between the sellers and the purchasers of the insurance policy packages requires one to be considerably skilful enough to have the convincing power to entice the buyer to take the opportunity of taking advantage of the offer while the premiums for sale still last.

The number of premium holders who want to sell their insurance packages increases every year. Apparently, those individuals who lost their job due to the present economic problems occurring today could not actually continue paying their insurance policies anymore usually chose to sell their insurance packages than actually subjecting them to funding programs as they already need cash at present. This is where your role as agent who sells structured settlement payment comes in. However, with the skills required to complete the task, you are sure in need of accepting training from expert brokers who have the needed skills and experiences to handle the situation.

Through online institutions offering such trainings, you are in for a huge improvement. Basically, the aid institutions are in a great aim of finding better ways to create a more susceptible environment for you to find prospected sellers of insurance premiums and give you better chance for convincing buyers to take the offer as you present the insurance packages to them. Through learning from the basic instructions that these training institutions offer, you would surely be able to sell structured settlement payment packages in no time.

Don’t worry as some of these training institutions are offering free chat services that would allow you to find better assistance through the related experiences of other brokers in the field who are more than willing to share their thoughts and opinions on how you could be helped to better improve your selling skills and approaches to the buyers of your insurance packages.

Structured Settlement Loan

In the financial world, there are various means and approaches towards the issue of financial management. Because money is mainly perceived to be a significant medium in the present world and is widely used in various situations and issues, it is important to manage its use properly thus maximizing its full potential and purpose. Likewise, in the field of legal settlement or civil liabilities payment, money is also widely used as it is the commonly agreed upon medium for the settlement payment. However, there are various approaches and means towards achieving this concept which can either be of lump sum payment or through structured settlement or partial installment payment.

At present, the structured settlement approach is commonly used and preferred as this alleviates the heavy burden of lump sum amount from the paying party. Instead, partial instalment payment of minimal portion will be released based on the agreed structural payment system such as annual, semi-annual, and others. Indeed, the application of structural payment is most advantageous especially for the paying party however it often present some limitations particularly on the recipient such as losing the opportunity for the total lump sum amount or the necessity for duration of periods before the said party could receive the said interest. But those problems have a solution and it does not require you to sell your structured settlement rights. Instead, you can simply opt for a structured settlement loan which likewise grants your need for money in a faster and simpler way.

As it name depicts, structured settlement loan is likewise similar to the other financial loan in the corporate business world. It is mainly a mode of borrowing money from an institution to address present or circumstantial financial needs. The only difference in structured settlement loan is that you can use your right to collect the settlement payment as your collateral. In the system of structured settlement loan, you will enter into an agreement where you will borrow money and pay it through giving your settlement claim to the lender as both your collateral and payment over the duration of the agreed loan contract.

Structured Settlement Loan

During this period, the lender will collect the payment from the structured settlement and deduct the amount collected as partial payment to the amount loan. The other elements included in the loaning contract such as interest, duration, and payment intervals will be decided under the agreement of both parties and presented under a legal contract. Structured settlement loan is indeed a great solution for people caught in a need for money ahead of the claim payment. Through the structured settlement loan, you can address your financial need with ease and security without selling your right to the entire structured settlement payment.