Annuities
Tax-Deferral
Advantages of a Tax-Deferred Annuity
Retirement Taxes
We believe that a solid retirement strategy is essential for preparing for the future. We work hard to help you protect what you have worked so hard for. Our clients often ask us, “What is a reasonable rate of return* for retirement strategy?”. It is important to them to protect their money and realize some gains.
*Our products offer a reasonable rate of return, over time.
Tax-Deferred Annuity After-Tax Dollars
Purchasing a fixed index annuity (FIA) using after-tax dollars may provide tax benefits. Deferred Annuities work in 2 different phases:
Accumulation Phase
At this stage, your FIA has a tax advantage because it grows tax-deferred.
Distribution Phase
This is the period when a policy owner begins to receive monthly annuity payments. When you withdraw the money, only ordinary income taxes will apply. With a lower liability, you could earn more in retirement.
Differences between deferred annuities and IRAs and 401(k)s
Tax deferrals are also available through traditional IRAs and 401(k) plans. A fixed indexed annuity (FIA) does not have a contribution limit like a 401(k) or an IRA. Income amounts, policy limits, and investments are all up to you.
You may be able to benefit from an FIA if these traditional options have been exhausted. This allows you to save more money for retirement. Those struggling to catch up with their retirement income may find this to be useful.
Without being taxed, your money compounds year after year. Tax-deferred investing helps you keep every dollar you earn.
Tax-Deferred Annuities for Early Retirement
If you retire early, how are annuities taxed? Based on your situation, you might receive a bonus tax benefit.
You must meet a few criteria to be eligible for these benefits.
Are you under the age of 59½?
Do you have a 401(k) plan providing lump-sum payments?
Was the lump sum payment part of a severance package or a retirement package?
FIAs may be of interest to you if you answer “yes” to all three questions.
Sadie Sicka can help you determine which plan for retirement taxes, namely, a tax-deferred annuity is the right investment option for you.
