TheLifeInsuranceGroup.com- Independent General Insurance
Agency, Licenced in the state of Maryland only.
PO BOX 26537 | Baltimore, MD 21207
Agency, Licenced in the state of Maryland only.
PO BOX 26537 | Baltimore, MD 21207
- Introduction to Annuities
A Brief History of Annuities
Annuities were developed in Scotland in the early 1800s and made their way to America late
in the century. Annuities were originally developed to provide a method for distributing the
proceeds from life insurance policies. The early annuities were, quite simply, a stream of
equal payments spread over the lifetime of the recipient. The feature that made annuities
unique was that the payments could be guaranteed for as long as the recipient lived; no other
investment could do that.
Consider this example of the usage of an annuity:. if a spouse died and left a life insurance
settlement to provide for his or her spouse, an annuity could be used to guarantee that the
income would be available for the remainder of the spouse's life, regardless of how long they
lived. Even today, annuities are the only investment available that can guarantee a lifetime
income.
Examples of Annuities in Everyday Life
Annuities are all around us, although their existence may not be immediately obvious. When prizes are awarded for state
lottery drawings, such as a $1 million prize paid over twenty years, the payment vehicle is an annuity. The state lottery
commission makes a single payment to an insurance company in return for the insurance company making ongoing annuity
payments.
When people retire and begin receiving their pensions, corporations purchase annuities to fund the pension payments.
When large court settlements are awarded, such as to a child who was severely injured in an accident, the awards are
usually made as annuities (referred to as structured settlements). As you can see, annuities are already in widespread use
and have been for many years.
Changes to Annuities
For most of the twentieth century, annuities existed as a relatively obscure financial product, used primarily to provide
guaranteed income. During the seventies, however, innovations in the design of annuities and the changing needs of
American consumers caused this once mundane product to emerge as one of the most important investment vehicles of the
last half-century.
Several trends set the stage for annuities to become important investment alternatives. During the seventies and eighties,
Americans were pushed into increasingly higher" tax brackets because of soaring inflation. Inflation drove up the cost of
goods at a rate never seen in this country before. Although the income levels of many Americans kept pace with inflation,
taxes took a large share of their earnings each year. This was because the percentage of income owed as taxes (that is, the
tax bracket) was based on total income, and tax brackets were not adjusted to take into account the impact of inflation.
Income rose each year in absolute dollars, but purchasing power stayed the same or even decreased.
Annuities emerged with a new focus; instead of being offered primarily to produce lifetime income, they were, for the first time,
promoted as tax-advantaged accumulation accounts. Read on.....
Annuities are all around us, although their existence may not be immediately obvious. When prizes are awarded for state
lottery drawings, such as a $1 million prize paid over twenty years, the payment vehicle is an annuity. The state lottery
commission makes a single payment to an insurance company in return for the insurance company making ongoing annuity
payments.
When people retire and begin receiving their pensions, corporations purchase annuities to fund the pension payments.
When large court settlements are awarded, such as to a child who was severely injured in an accident, the awards are
usually made as annuities (referred to as structured settlements). As you can see, annuities are already in widespread use
and have been for many years.
Changes to Annuities
For most of the twentieth century, annuities existed as a relatively obscure financial product, used primarily to provide
guaranteed income. During the seventies, however, innovations in the design of annuities and the changing needs of
American consumers caused this once mundane product to emerge as one of the most important investment vehicles of the
last half-century.
Several trends set the stage for annuities to become important investment alternatives. During the seventies and eighties,
Americans were pushed into increasingly higher" tax brackets because of soaring inflation. Inflation drove up the cost of
goods at a rate never seen in this country before. Although the income levels of many Americans kept pace with inflation,
taxes took a large share of their earnings each year. This was because the percentage of income owed as taxes (that is, the
tax bracket) was based on total income, and tax brackets were not adjusted to take into account the impact of inflation.
Income rose each year in absolute dollars, but purchasing power stayed the same or even decreased.
Annuities emerged with a new focus; instead of being offered primarily to produce lifetime income, they were, for the first time,
promoted as tax-advantaged accumulation accounts. Read on.....
| We are licensed Maryland Life and Health Insurance Agents Proudly serving Proudly serving Baltimore Maryland and surrounding counties. Allegany County, Charles County, Prince George's County, Anne Arundel County, Dorchester County, Queen Anne's County, Baltimore City, Frederick County, St. Mary's County, Baltimore County, Garrett County, Somerset County, Calvert County, Harford County, Talbot County, Caroline County, Howard County, Washington County, Carroll County, Kent County, Wicomico County, Cecil County, Montgomery County, Worcester County |
|
The Life Insurance Group
Financial Services & Insurance. Protecting Your Financial Future.
Call for an Appointment. Local in Baltimore, MD 410.456.5356
Financial Services & Insurance. Protecting Your Financial Future.
Call for an Appointment. Local in Baltimore, MD 410.456.5356
 | |  | |  | |  | |  |
 |
| |
 |
| |
 |
| |
 |
| |
 |
 | |  | |  |