Tax Deferred- Why An Annuity?

Questions and Answers about Annuities: Tax-Deferred Annuities

Florida Annuity Quote

Annuity Retirement Questions: 401K Options

If you are focused on saving for retirement—and almost everyone, these days, is making an effort to keep an eye on their portfolio to protect it from the turbulent markets, and plan ahead for later—there are a number of options. Your company may offer a 401(k) plan that automatically allows you to save—and one of the easiest ways to save is to have contributions invested before they spend even a moment in your bank account! Company 401(k) plans are a great option for retirement savings and should not be ignored—especially if they include the option of a company match for even a portion of your investment—this is, quite simply, an addition to your everyday salary.

Annuity Growth Chart

Annuity Growth Chart

Annuity Questions: IRA

Beyond company sponsored 401(k) plans, you may wish to contribute to a personal Individual Retirement Account (IRA). It makes sense to talk to an advisor about your options, but you’ll probably wish to diversify your accounts by investing in different types of underlying securities for your IRA and your 401(k) to provide protection in any market. IRA contributions max out at a certain level (depending on individual or couple), however, and investors may still wish to invest in an option that provides tax-deferred savings.

Tax-deferred annuities may be a good resource. Their earnings, like IRA’s or 401(k), compound without being taxed…and you will not pay taxes on the gains until you start withdrawing funds in retirement (during which time you may be subject to a lower tax bracket).

Tax-deferred annuities may be variable or fixed; both offer guarantees of some level of principal and gains. Variable annuities are invested to provide greater opportunity for growth—but have, therefore, greater risk potential and may not be appropriate for someone very close to retirement. Fixed annuities perform more like a certificate of deposit (but without the FDIC protection and guarantees that accompany a CD). Another thing to keep in mind is that annuities, sold by insurance companies, have costs associated with them – and you should discuss all fees, costs, etc with your advisor prior to purchase.

Annuities are not for everyone. But if you are aggressively planning for retirement, and have a long investment horizon—and have maxed out your 401(k) or IRA—they may be an option worth looking into.