“Annuities can serve a vital role in your retirement planning if done properly.” Annuities often have a bad reputation associated with them; so it is important to determine if it is a suitable investment for your situation. I will help find a well-rated insurance company that will provide the best solution for your needs.
Advantages:
- Most commonly set up to provide a steady, reliable income source immediately or at some point in the future
- Ability to accurately predict future income in developing a retirement plan
- If set up properly, the annuitant will not outlive the income provided
- Earnings are tax-deferred until withdrawn
- No limits on contributions
Disadvantages:
- Complicated – There are many available features from the various insurance companies
- Often have high costs and fees
- Many annuities are not liquid; there is often a penalty for taking above a set annual percentage (5-10%) within a certain timeframe (usually between 5 – 10 years)
- Most withdrawals before age 59 ½ incur a 10% premature distribution penalty
- No Capital Gains treatment on earnings; treated as a combination of ordinary income and return of premium when funds are withdrawn
Types of Annuities:
- Variable – Account value, death benefit, income, mostly determined by underlying investments in the annuity contract
- Fixed – Provides a Fixed interest rate for the duration of the annuity contract
- Indexed – Account value, death benefit, income, determined by combination of a fixed interest rate and the tracking of a certain investment index
- Immediate – Upon making a single lump sum investment, Immediately receive an income stream over a specific period (10 – 15 years, lifetime or joint lifetimes, etc.)
