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Guaranteed Sources of Retirement Income

Identifying Retirement Assets for Income Sources

Mesa 1/30/2018 11:00 AM GMT (WooEB)

Annuities, have advocates and critics. The advocates 
feel that the insurance protection the contracts offer, the potential for growth, and the promise of lifetime income make them valuable retirement- planning products. Critics argue that annuity fees are too high. Maybe variable annuities, but not fixed rate and income annuities. Watch part 2 Guaranteed Sources of Retirement Income from the series Annuity Retirement Income with syndicated financial columnist and talk show host Steve Savant.

Content: If you participate in a retirement plan where you work, you may find that your employer includes a fixed or variable annuity, or both, in the menu of plan choices. When annuity contracts are offered through a qualified plan they are considered qualified annuities. In this case, qualified means subject to the federal rules that govern how the plans are operated. Money you contribute to a qualified annuity reduces your current taxable salary in addition to accumulating tax-deferred earnings. But
you must begin taking required withdrawals
no later than 701⁄2 and take at least the required minimum each year.

Alternatively—or in addition—you can buy an annuity that’s not offered through a qualified plan. In this case, the contract is a nonqualified annuity. Among the key differences are that you pay the premiums with after-tax dollars, you can contribute more than the federal limit for qualified plans, and you can postpone taking income until much later in your life if you wish.

Annuities are insurance company contracts. The premiums you pay and tax-deferred earnings on those premiums are designed to be a source of retirement income, either in the future if you choose a deferred annuity or right away with an immediate annuity. With a deferred annuity, the principal and earnings accumulate in the build-up period. Eventually you can annuitize, which means you convert your account value to a stream of lifetime income, or you can take the money some other way. With an immediate annuity, the lifetime income you receive is based on factors like the amount of your purchase, your age, and the interest rate.

An annuity contract purchased to fund an IRA or employer sponsored plan will not provide tax-deferral benefits beyond those provided by the IRA or plan itself. Investors should consider.

Contributions from the book Guide to Understanding Annuities in this press release are used with permission from Light Bulb Press.



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