Monthly Archives: March 2013

Definition of an Annuity Contract

The definition of an Annuity Contract is a drafted agreement between and insurance company and a customer that explains the obligations of each party, such as the structure of an annuity-variable or fixed, any inherent penalties for early withdrawal, specific provisions for the spouse and more.

Definition of an Annuity Contract

An Annuity is a financial product that is designed by financial institutions and is supposed to accept funds and grow them. Funds accepted from an individual, once they reach annuitization, are paid back as an income stream at a later point in time. Annuities hence become a mean to secure a steady cash flow for a person during their retirement years.

Annuity contracts exists under a 403(b) plan. They are referred to as ‘tax sheltered annuities’ or ‘tax-deferred annuities.’

An annuity contract is important for the individual investors because it legally binds the insurance company to provide a guaranteed periodic payment as soon as the annuity reaches maturity. The structure of the contract must be studied to ensure that risk free retirement income.

In the United States, a contract is created when an insured party pays an insurance company a single premium or a lump sum that will be paid back in installments over a stipulated period.

The annuity contact therefore guarantees a steady payment over time paid through fixed payments, until the death of a person or persons named in the contract.

Some annuity contracts can also provide clients with the leeway to accumulate funds free of income and capital gains tax and later to take lump sum withdrawals without using the guaranteed income stream opportunity. Most clients find this approach better and have adopted this method as the way forward.

Annuity contracts are usually defined by the Internal Revenue Code and thereby regulated at individual state level. Annuity insurance and hence annuity contracts can only be issued by life insurance companies. It is also a new practice though for donors to arrange finance to non-profits to reduce tax.

Based on state legislation, insurance companies may provide various annuity contracts between donors and non-profits to reduce taxes. As a result, some contracts may be available in some states that are not available in others. An annuity contract can be structured so that is has two possible phases, the deferral phase where the customer deposits accumulates money into an account and the income phase where customer receives a steady stream of income.

The Best AARP Retirement Calculators

The web has plenty of AARP retirement calculators that are supposed to help one in understanding the best financial options out there. But what are some of the reliable AARP calculators today? We have some options listed below that you can check out.

AARP Retirement Calculators

The AARP Calculator

This calculator is developed by the American Association of Retired Persons. Users get easy questions that even laypeople can answer with no need for too much prior knowledge. The calculator also shows you whether as a single retiree or as a couple, you will get a shortfall when attempting to meet your goals and whether your will be required to adjust your lifestyle.

The AARP retirement calculator can also allow you to figure out the amount you need to pay regularly to retire at say an age of 65 years and the adjustments that need to be done on the current payments given current rates.

The AARP retirement calculator assumes that the husband will pass on at the age of 87 and the wife at 90. Adjusting the survival rate to 95 increases the amount to be saved from 17.4% of net pay to 19.4%.

CNN Money

The CNN Money AARP retirement calculator asked some questions that assumed prior a knowledge of financial procedures. One of these questions is the estimation of the expected annual salary and current marginal income tax rates.

Another question that requires filing is how the 401 (k) assets are invested but in this case, different sample sets are provided for easy recognition.

Finally, the calculator provides the expected annual rate of return at the percentage of income, for a sample case, at about 11.35%. One additional feature that this AARP calculator provides is the probability that this will happen.


This AARP retirement calculator is a little difficult for an average person to use because it requests for various information that is not common knowledge for an average person to provide including current and future tax rate, expected earnings on savings and expected inflation rates. It lacks the option of calculating the expected returns for couples and results in contributions that are as high as 5 times compared to the original AARP retirement calculator.

Schwab and SmartMoney

These two calculators were also easy to use for the layman. The Schwab indicated that the couple or singles should wait until 82 to retire, while the SmartMoney was more optimistic setting the retirement at 62 years.

2013 Roth IRA Income Limits

2013 Roth IRA income limits are issued by the US government and are of particular interested to anyone who is looking to contribute a part of this year’s earnings to their retirement fund. This article describes the dynamic of changes in these limits over the years and the current situation, which is slightly different from the previous year.

2013 Roth IRA Income Limits

What is a Roth IRA?

Roth IRA is a retirement plan that allows you to redistribute a part of your income into a non-taxable retirement fund. Unlike most other tax advantaged retirement plans, it grants tax breaks when withdrawing from the fund, not upon your contribution.

This allows non-taxable growth and relieves all worries about future tax rates. Due to these extremely attractive terms, the US Congress has also placed various Roth IRA income limits in place to prevent high-income taxpayers from sheltering their income from taxes this way.

What Are Roth IRA Limits?

That’s why you can only contribute money to Roth IRA if your gross income for the year is under a certain government-issued threshold. In addition, the size of the contribution cannot exceed a certain amount.

The particular terms change from one year to another, so you need to be aware of the latest Roth IRA income limits in 2013 to see if you are still eligible and know how to go about your contributions.

The New Roth IRA Income Limits in 2013

So, what are the Roth IRA income limits in 2013, compared to the previous year? The eligibility threshold has increased from its 2012 value both for married couples and singles, allowing more people to take advantage of the unique tax advantages offered by Roth IRA.

The cut-off point is now $178,000 to $188,000 for married couples and $112,000 to $127,000 for individuals. This means that if you file individually and your gross income in that year exceeds $127,000, you won’t be given access to the terms of a Roth IRA plan.

Roth IRA Income Limits for Contributions

When it comes to your contributions, the Roth IRA plan specifies different limits for people aged 49 or less and those who are 50 years or older.

If your age is 50 years or more, the 2013 Roth IRA income limit in your case is $6,500. People who are younger than that will only be able to contribute $5,500 this year.

Both values have also moved up $500 since last year, making the contributions slightly more appealing in 2013.

You should be aware that the terms for 401K and other retirement plans have also gone through some changes. If you are interested in any of them and would like to see how they relate to the 2013 Roth IRA income limits, you should look up their updated values as well.

Other Terms

Please note that the deadline for making your contribution to Roth IRA for the year 2013 is in April 15th of 2014. You can only put money into your retirement fund until that date.

Now that you know the 2013 Roth IRA income limits, you can evaluate whether this retirement plan is going to work in your situation or you should look into other options, such as 401K.