Fraternity-Testvériség, 2007 (85. évfolyam, 1-3. szám)
2007-07-01 / 3. szám
Report of the Secretary-Treasurer One of the attractive products HRFA offers our members of the Federation is an annuity. An annuity is a contract in which HRFA makes a series of payments at regular intervals or in a lump sum in return for a premium or premiums that you have paid. Annuities are most often purchased for future retirement income. Only an annuity can pay an income that can be guaranteed to last as long as you live. It must be remembered that an annuity is not life insurance or a savings account to reach short-term financial goals. HRFA offers three different types of annuities: Single Premium Deferred, Flexible Premium deferred, and Immediate. The single premium deferred annuity, as the name applies, is a one-time deposit to the annuity. With a flexible premium deferred annuity, you can make periodic or regular deposits to the annuity. Income payments from a deferred annuity start many years later. With an immediate annuity, payments to you start after you have paid a single premium. Deferred annuities have an accumulation period, which is the time between when you first open the annuity and make payments to the time your income payments begin. During the accumulation period, the Federation invests your premiums and earns you an income which increases the investment in your annuity. The rate of earning on your annuity is guaranteed by the Federation. Therefore, your annuity earns a guaranteed rate of return regardless of the prime interest rate fluctuations or the performance of the stock market. It should be noted that if you withdraw part or all of your money prematurely, there is a surrender charge. However, you may withdraw a limited amount of your money, which is called free withdrawal, and there is no surrender charge. On your quarterly statements from the Federation, the amount of free withdrawal is disclosed. One of the most important benefits of deferred annuities is your choice at maturity to take the lump sum payment or opt to receive income payments during the payout period. Income payments are mailed quarterly by the Federation. The size of the income payment is based on the accumulated amount in your annuity. The benefit rate usually depends on your age and sex and the annuity payment option that you choose. For example, you might choose payments that continue for a limited amount of time, 20 years for instance, or you may choose the lifetime payments option, which will guarantee you income for as long as you live. Lastly, the tax treatment of annuities is special. You should consult a professional tax advisor to discuss your individual tax situation. Generally, you are not taxed on the interest your money earns while it stays in the annuity. This is called a tax-deferred accumulation but it is not a tax-free accumulation. Also, part of the payments you receive from your annuity will not be taxed. Specifically, the principal, or the amount you paid into the annuity, will not be taxed. However, you must pay taxes on the interest income portion of your annuity. You may also have to pay a 10% tax penalty if you withdraw the accumulation before you are 59 % years old. This is just a brief description of the annuity offered by your Federation. Before you purchase an annuity, you should get answers to several questions, such as: □How much retirement income will I need? □How long can I leave my money in the annuity? □ When will I need income payments? □ Does the annuity let me get the funds when I need them? □ Do I want a fixed annuity with a guaranteed interest rate and no risk of losing the principal? Answers to the above questions can be provided by your Home Office so please call and we will be happy to assist our members. Fraternally, Leslie László Megyeri Page 4 Fraternity - Testvériség - Fall 2007
