ANNUITIES and IRAs

Annuities

All American Advisors are pioneer providers of Equity Indexed Annuities (also called Fixed Indexed Annuities) to our clients. An equity indexed annuity is a contract with an insurance or annuity company, like any other form of annuity. What separates equity indexed annuities from other forms - however - is that the principal investment is guaranteed.

We emphasize this type of annuity for our clients because the contracts are mostly suitable for those who are retired or nearing retirement. The returns are typically more conservative than other forms of investments, but there is a huge upside: there is no risk associated with equity indexed annuities. The objective of purchasing an equity index annuity is most often to realize greater gains than those provided by fixed annuities, while still protecting principal. This makes it a perfect investment form for the elderly and those approaching retirement, and is one strategic component of All American Advisors' program for retirement income planning. Equity indexed annuities are tax-deferred investments.

How do Equity Indexed Annuities work?

The indexed annuity is virtually identical to a fixed annuity except in the way interest in calculated. As an example, consider a $100,000 fixed annuity that credits a 5% annual effect interest rate. The owner then receives an interest credit of $5,000. However, in an equity indexed annuity the interest credit is linked to the equity markets. For example, assume the index is the S&P 500 and a one year point-to-point method is used and that the annuity offers a 10% cap. The $100,000 annuity could credit anything between 0% and 8% based on the change in the S&P 500.

This allows the owner the security of knowing that the $100,000 is safe but that rather than receiving the sure 5% they can receive up to 10%.

There are many forms of equity indexed annuities, and many options available with distinct terms and provisions. A wide variety of features and guarantees have been developed by insurance companies in order to make annuity products attractive. These include death and living benefit options, extra credit options, account guarantees, spousal continuation benefits, reduced surrender charges, and various combinations thereof. All American Advisors helps its clients to explore these options and select the type of annuity that best suits their specific aims and goals.

We also offer other types of annuities to our clients, including:

• Fixed annuities: which offer some sort of guaranteed rate of return over the life of the contract, but without the same potential for gain as indexed annuities.
• Variable annuities: which allow money to be invested in "separate accounts" in a tax-deferred manner. Their primary use is to allow an investor to engage in tax-deferred investing for retirement in amounts greater than permitted by individual retirement or 401(k) plans. In addition, many variable annuity contracts offer a guaranteed minimum rate of return (either for a future withdrawal and/or in the case of the owner's death), even if the underlying separate account investments perform poorly.
• Immediate annuities: which are insurance policies that, in exchange for a sum of money, guarantee that the issuer will make a series of payments. These payments may be either level or increasing periodic payments for a fixed term of years or until the ending of a life or two lives, or even whichever is longer. The predominant characteristic of the immediate annuity is that it is a vehicle for distributing savings with a tax-deferred growth factor.

IRAs

An Individual Retirement Account (or IRA) is a retirement plan account that provides some tax advantages for retirement savings.

We consult with our clients on a variety of IRA options, including:

• Roth IRA - contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free.
• Traditional IRA - contributions are often tax-deductible. All transactions and earnings within the IRA have no tax impact, and withdrawals at retirement are taxed as income.
• Self-Directed IRA - a self-directed IRA that permits the account holder to make investments on behalf of the retirement plan.