DEFINITION OF 'ANNUITY' / education funding assistance & more
A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.
Annuities can be structured according to a wide array of details and factors, such as the duration of time that payments from the annuity can be guaranteed to continue. Annuities can be created so that, upon annuitization, payments will continue so long as either the annuitant or their spouse is alive. Alternatively, annuities can be structured to pay out funds for a fixed amount of time, such as 20 years, regardless of how long the annuitant lives.
Annuities can be structured to provide fixed periodic payments to the annuitant or variable payments. The intent of variable annuities is to allow the annuitant to receive greater payments if investments of the annuity fund do well and smaller payments if its investments do poorly. This provides for a less stable cash flow than a fixed annuity, but allows the annuitant to reap the benefits of strong returns from their fund's investments.
The different ways in which annuities can be structured provide individuals seeking annuities the flexibility to construct an annuity contract that will best meet their needs.
EDUCATION FUNDING ASSISTANCE
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RC 529 vs IRC 7702 — Saving for College
First of all, what is a 529? (It is the Tax code governing college savings plans) The 529 college savings plan is a state sponsored, tax-advantaged tool that is offered so families can save specifically for qualified higher education expenses for their children. Personally, I do not like to call them ‘savings’ plans due to the fact that they are investments that come with ‘risk of loss’. To me, a ‘savings plan’ means the money is in a safe position with a guarantee of ‘no loss’.
What is a 7702? (It is the tax code governing cash value in life insurance policies). The 7702 college savings plan is not a state sponsored plan. It is however the Internal Revenue Code that describes the tax advantages associated with the cash value in life insurance products.
We show you a way of utilizing these cash values to fund any expenses including but not limited to education expenses, but with much more flexibility of use, while also offering tax advantages.
I must point out now that an IRC 529 is an investment vehicle specifically for saving for qualified higher education expenses. On the other hand, the IRC 7702 is the code that relates to the cash value in life insurance policies. So it is not generally considered a savings vehicle by the general public. It is a life insurance policy.
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