Retirement Security

Immediate annuities offer retirement income security.  As retirement nears, you may find it is the right time to consider an immediate annuity.  Consider transferring money accumulated in another growth fund to an immediate annuity.  You also have the option of converting your deferred annuity to an immediate annuity to begin receiving payments now.

Why Should You Buy an Immediate Annuity?

Immediate annuities can provide guaranteed income for life.  You may not receive enough income from Social Security or other retirement accounts.  The income generated by an annuity can add to your present or future retirement income.

You decide the payment schedule for your annuity income.  Annuities come with a variety of payment options.   Whether quarterly, monthly, or annually, your insurance company has a payday to suit your needs.

Taxes are due on the amount you receive as a payment, not on the entire annuity balance.  This allows your principal balance to grow free from taxes until you receive a payment.

Having a secure and reliable investment will ease your fears about retirement.  Increasing longevity makes it difficult to predict your own lifespan.  Estimating the exact amount of money you will need to carry you through retirement is a challenge.  Spend too much and your income drops.  Spend too little and you may give up some of the things in life that you enjoy the most.  By providing you with a fixed and guaranteed income for life, immediate annuities can reduce some of your retirement concerns.

Points to Think about before Purchasing Your Annuity

Money paid in to an annuity has usually been taxed already.  The IRS allows you to contribute as much of this post-tax money to an annuity as you desire.  Invest as much pre-tax money to your other investments as the IRS allows before you pay post-tax dollars to your annuity.  An annuity may be used to fund an IRA, SEP, 401(k), and 403(b); however, there are limits to the amount you can contribute.  Federal tax laws require you to begin taking distributions by April 1st of the year following the date you turn 70 ｽ.  If you fail to meet this deadline, the IRS will impose a 50% tax penalty of the amount of the shortfall.

Expenses and fees differ among Annuities and their issuing companies.  Compare several contracts to find the best deal.  Morningstar and Lipper Analytical Service regularly publish fee comparisons between companies.  Remember that high expenses can counteract any gains in your investment.

Interest income from annuities is classed as normal taxable income.  *Capital gains tax rates are sometimes lower than an investor normal income tax bracket.  If you find yourself in a higher income tax bracket, you may actually pay more taxes on your annuity income than if you paid capital gains taxes on another investment; however, annuity balances still have the benefit of tax deferment.  Other investments might subject you to both capital gains and ordinary income taxes.  This can happen even when you have not cashed out your investments.  Consultation with your tax professional can answer any questions about your own taxable income.

*Income tax laws and regulations are subject to change.