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Most annuities allow you to withdrawn interest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.
