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Projected Account Value and Yield to Surrender
for
Fixed and CD-Type Annuities |
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| Method
of Calculation - Account Value |
We
have created a way to compare the
interest earnings of fixed annuities
that represent real world application.
We project the dollar accumulations
and the yield calculation based on
the following assumptions.
How annuities really work
- Interest Rates
When an annuity policy is issued
the company sets the first year
interest rate. This rate is guaranteed
for the first policy year and
we refer to it as the current
rate. The base rate
is that interest rate which the
company projects it will pay in
the second year and thereafter.
This base rate is also
referred to as the "renewal
rate" is not guaranteed.
In fact some companies pay a "renewal
rates" which are less than
the originally projected base
rate.
Note the the difference between
the current rate and
the base rate is referred
to as the bonus rate.
We use the Current Rate
(for the first year) and the
Base Rate (for each year
thereafter) in our formula to
calculate the projected "Account
Values."
- Surrender Charges, Withdrawal
Charges
The surrender charges last for
a period years and we calculate
the projected "Account Value"
for the number of years the surrender
charges exist. For example; if
the surrender charge of the policy
lasts seven years, we calculated
the projected "Account Value"
for only seven year. The reason
is the after the surrender charge
expires the interest rate is dropped
to the contractual guaranteed
minimum and the policy values
are usually transfer to another
annuity. To continue projecting
the accumulated value beyond this
point is meaningless.
Most annuities allow you to
withdrawn interest from your
annuity without penalty. Some
annuities allow you to withdraw
interest with out paying a penalty
at the end of the policy year
or after 30 days, then as earned.
All most all annuities allow
you to withdraw up to 10% of
the account value before a surrender
charge or withdrawal charge
is applied. YOU must know
how the Withdrawal or Surrender
Charges apply before buying
an annuity policy to save yourself
unnecessary expenses.
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source :AnnuityRateWatch.com
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Copyright © 2005 Oleg Skurskiy Authorized
Independent Agent, CA License 0E50389 |
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