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The INDEPENDENT, July 6, 2011
Annuities 101 is for those who don’t know how annuities work
by Jason Alderman (www.prac-
ticalmoneyskills.com)
Nervous investors have
faced many challenges over
the last few years searching for
safe havens. That’s one reason
many turn to annuities to en-
sure a steady stream of retire-
ment income. But with so many
types of annuities offered – and
complex rules, fees and restric-
tions – it’s not uncommon for
investors to buy products not
ideally suited to their needs.
Here’s a brief primer on how
annuities work:
Annuities are insurance
products that pay out income.
Typically, you make a lump-
sum or series of payments to
the seller. In return, they agree
to pay you periodically for a
definite period (say 20 years)
or an indefinite period (until
death) in one of two ways:
• Immediate annuities begin
paying benefits the year you
deposit your money.
• With deferred annuities,
your account grows on a tax-
deferred basis until you begin
receiving payments at a later
date.
There are three basic types
of annuities:
• Fixed annuity. You’re paid
an agreed-to rate of interest
while your account is growing
and receive periodic payments
of a specified amount.
• Indexed annuity. The seller
provides an investment return
based on changes in a particu-
lar index (such as the S&P
500).
• Variable annuity. You invest
your account among a variety
of options (typically mutual
funds) and your rate of return
and payment amounts will de-
pend on their performance.
Many people purchase an-
nuities because they grow tax
deferred – that is, your contri-
butions are not taxed, but any
earnings they generate are
taxed at your regular income
tax rate. Annuities have no an-
nual contribution limit, but you’ll
pay a 10 percent federal tax
penalty withdrawals before age
59-1/2.
One big tax disadvantage is
that, whereas earnings from
money invested in stocks,
bonds or mutual funds is taxed
as capital gains, annuities are
taxed at regular income tax
rates, which can be significant-
ly higher.
Annuities can be very ex-
pensive compared to other
types of investments. Before
signing any agreement investi-
gate:
• Sales commissions, which
initially can run as high as 10
percent, plus ongoing commis-
sions in subsequent years.
• Depending on what type
you buy, you could be charged
an additional 2 percent or more
per year in various account
management fees.
• Most deferred annuities
charge an early withdrawal
penalty called a surrender
charge, which usually starts at
7 or 8 percent and gradually
declines to zero. However, they
can also be much higher, so
read your contract carefully.
A few additional precau-
tions:
• Consider consulting a fee-
only financial advisor versus
one who earns commissions
recommended products.
• Because 401(k) plans and
IRAs are already tax-deferred
and have lower fees, it may not
make sense to roll over those
balances into an annuity.
• Before moving an existing
annuity into a new account, an-
alyze surrender charges, sales
commissions and other fees
you’ll be charged.
• Many annuities end upon
your death, so if you want your
heirs to continue receiving your
benefit, investigate joint and
survivor or term-certain annu-
ities.
• Check the insurer’s credit
rating with credit bureaus like
A.M. Best, Standard & Poor’s
and Moody’s.
To learn more about annu-
ities, visit investor websites for
the Securities and Exchange
Commission (www.investor.
gov) and the Financial Industry
Regulation Authority (www.fin-
ra.org/Investors/index.htm).
Bottom line: Annuities are
sometimes a good investment
option, but make sure you fully
understand the terms, cost-
structure and possible penal-
ties before signing on the dot-
ted line.
Community Calendar
VERNONIA
Alcoholics Anonymous
Mondays
6:30 p.m., 410 North Street
Alcoholics Anonymous
Thursdays (Big Book Study) 7:00 p.m., 410 North Street
American Legion Post #119
2nd Tuesday
7:00 p.m., 627 Adams Avenue
Booster Club
2nd Wednesday
7:00 p.m., VHS Library
Boy Scout Troop 201
Tuesdays
7:00 p.m., Scout Cabin
Boy Scout Troop 860
Wednesdays
7:00 p.m., LDS Church
Cemetery Beautification Comm.
2nd Thursday
6:30 p.m., Library
CERT
4th Wednesday
For Info Call 503-429-3018
Chamber of Commerce
2nd Wednesday
For Info Call 503-429-6081
Community Coalition
2nd Monday
12:30 p.m. School District Ofc.
Cub Scout Pack 201
Scout Cabin
For Info Call 503-429-4250
Friends of the Library
1st Tuesday
7:00 p.m., Vernonia Library
Girl Scouts, Neighborhood 4-2
For Info Call 503-819-0143
Izaak Walton League
3rd Thursday
For location call 503-429-7193
Kiwanis Club
2nd & 4th Tuesdays
6:30 p.m., New Hong Kong
Lions Club
1st & 3rd Tuesdays
6:30 p.m., New Hong Kong
Municipal Airport Committee
1t Wednesday
6:30 p.m., City Hall
Pioneer Museum
For Info Call 503-429-3713
Public Works Committee
4th Tuesday
7:00 p.m., City Hall
Vernonia Cares Directors
For Info call 503-429-1414
Vernonia City Council
1st & 3rd Mondays
7:00 p.m., City Hall
Vernonia Community PTA
2nd Wednesday
7:00 p.m., WGS Library
Vernonia Garden Club
2nd Tuesday
1:30 p.m., Vernonia Library
Vernonia Grange
3rd Monday
7:00 p.m., Grange Hall
Vernonia Health Center
3rd Thursday
6:30 p.m., 510 Bridge St.
Vernonia Learning Center
1st Wednesday
6:00 p.m., VLC
Vernonia Parks Committee
3rd Wednesday
6:30 p.m., City Hall
Vernonia Planning Comm.
1st & 3rd Thursdays
7:00 p.m., City Hall
Vernonia Pride
2nd Thursday
1:00 p.m., City Hall
Vernonia Ridge Riders
Last Thursday
7:00 p.m., Senior Center
Vernonia RFPD Board
2nd Tuesday
6:00 p.m., Fire Station
Vernonia School Board
2nd Thursday
6:00 p.m., District Office
Vernonia Sr. Center Board
2nd Friday
10:00 a.m., Senior Center
Vernonia Transfer Station
2nd & 4th Saturdays, 8 a.m.-2 p.m.
Behind VHS
Vern. Volunteer Ambulance Assoc. 1st Tuesday
7:00 p.m., Fire Station
Vernonia Volunteer Firefighters
2nd Monday
7:00 p.m., Fire Station
WOEC Directors
3rd Tuesday
7:00 p.m., WOEC
MIST-BIRKENFELD
M-BRFPD Board Business Mtg.
2nd Tuesday
M-BRFPD Board Workshop
4th Tuesday
M-B Ambulance Drill
1st & 2nd Thursdays
M-B Fire Drill
1st & 2nd Wednesdays
M-B Helping Circle
2nd Monday
M-B SAR Drill
3rd Wednesday
M-B Volunteer Assoc.
1st Tuesday
Natal Grange
2nd Wednesday
T.O.P.S.
Mondays
Upr Nehalem Watershed Council For date call 429-0869
BANKS
Alcoholics Anonymous
Alcoholics Anonymous
American Legion Post #90
Banks City Council
Banks Fire District #13
Banks Library Commission
Banks Planning Commission
Banks School Board
Banks Youth Group
Chamber of Commerce
CPO 14
Everybody’s Hometown Band
Friends of the Library
Lions Club
Sunset Park Assoc.
T.O.P.S.
Friday
Wednesday
2nd Tuesday
2nd Tuesday
2nd Wednesday
3rd Tuesday
Last Tuesday
2nd Monday
Sunday, Wednesday
1st Thursday
3rd Monday
Tuesdays
2nd Tuesday
1st & 3rd Mondays
3rd Wednesday
Wednesday
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:00 p.m., Main Fire Station
7:30 p.m., Natal Grange Hall
9:00 a.m., Main Fire Station
7:00 p.m., Main Fire Station
7:30 p.m., Methodist Church
7:30 p.m., Methodist Church
7:30 p.m., Main Street Post
7:30 p.m., City Hall
7:00 p.m., Station 13
7:00 p.m., City Library
7:00 p.m., City Hall
7:30 p.m., Jr. High Library
7:00 p.m., UMC Youth Bldg.
12:30 p.m., Fire District Office
7:00 p.m., City Library
7:00 p.m., BHS Music Room
7:00 p.m., City Library
7:00 p.m., Brown Derby
8:00 p.m., Gun Club
7:00 p.m., Administration Bldg.
COLUMBIA COUNTY (All meet in St. Helens unless otherwise noted.)
Board of Commissioners
Wednesday
10:00 a.m., Courthouse
Citizens for Senior Justice
2nd Tuesday
7:00 p.m., Sunset Park Church
Columbia Comm Mental Health
1st Tuesday
5”30 p.m., 58646 McNulty Way
Columbia Soil & Water District
3rd Wednesday
7:30 p.m., NRCS , 2514 Sykes
County Fair Board
2nd Monday
6:00 p.m., Fairgrounds 4-H Bldg.
County Parks Commission
3rd Tuesday
Times vary, 1054 Oregon St.
Mental Health Advisory Comm.
Quarterly
For Info call 503-397-7211
Comm. on Children & Families
3rd Thursday 5:30 p.m. OSU Ext., 505 N. Hwy. 30
Local Alcohol & Drug Plan. Comm.
Quarterly
For Info call 503-397-7211
Organizations and meeting dates not listed may be included by calling 429-9410 or by mail to The INDEPENDENT, 725 Bridge Street, Vernonia, OR 97064.