Annuities
Annuities,
Life Insurance
reversed
Whether a client is looking for a safe and secure retirement vehicle like a fixed annuity with an interest rate that is guaranteed for a specified period, or they want to leverage gains in the market while hedging against loss, there is a retirement vehicle for each client's specific needs.
Today there are annuity products with riders that can give clients lifetime income and even elder care provisions. Annuities are popular retirement vehicles because earnings grow tax-deferred in accordance with IRS requirements until withdrawn, at which time they are taxed as ordinary income.
Two Main Annuity Strategies
Deferred Annuity:
A deferred annuity begins in the accumulation phase and later converts to the payout (annuitization) phase. You may make one or more payments, which grows tax-deferred as long as they remain in the annuity. Earnings are taxed as ordinary income when they are withdrawn from the annuity.
Immediate Annuity:
With an immediate annuity, regular payments are generated within a short period of time. Payments can be structured with great flexibility. Typically, an immediate annuity becomes a binding contract once it is funded and cannot be broken. The principal investment is surrendered in return for the promise of a guaranteed income stream paid by the insurance company.
Annuity Advantages
Annuities are tax-deferred vehicles and unlike other retirement accounts such as 401(k)s and IRAs, there is no annual contribution limit.
An Annuity grows tax-deferred.
When you eventually make withdrawals, the amount you contributed to the annuity is not taxed, but your earnings are taxed ordinary income.
There is a 10% federal tax penalty if you withdraw money before age 59½ for reasons other than death or disability.