Annuities

Good reasons to consider a deferred annuity as part of your financial retirement plan:

You postpone paying income taxes on any earnings until you withdraw money, typically during retirement, when you may be in a lower income tax bracket. All earnings can grow income tax-deferred.

There is no tax law restriction on how much money you can contribute. Unlike Individual Retirement Accounts (IRAs), federal tax law does not restrict the amount of after-tax money you can contribute to a deferred annuity. You can, however, use a deferred annuity to fund your traditional or Roth IRA, in which case you would be subject to federal tax law within IRA limitations. Of course, IRAs already receive the benefit of tax deferral, so there is no additional tax benefit to purchasing a deferred annuity.

You can provide death benefits to your beneficiaries. Death benefits for annuities vary according to contract. If you die prematurely, your annuity can offer a death benefit to your beneficiaries without the costs and delays of probate. Typically, your beneficiaries will receive what you have contributed (less withdrawals). In addition, some contracts have a provision where a spouse who inherits an annuity before distribution has begun can step in as the new owner of the annuity, and the tax deferral continues until amounts are withdrawn. A beneficiary who inherits an annuity before distribution begins can request a lump sum distribution without a federal tax penalty, but will be subject to full tax ation on the accrued earnings or gain on the contract.