Tax Debt Help - Building Retirement Income With Annuities

Building retirement income with annuities

Annuities may help you provide additional retirement income by allowing you to accumulate tax-deferred savings and then receive periodic payouts for a specified period of time, beginning now or at a later date. Annuities are commonly used to supplement your monthly retirement income already received from your IRA and 401(k) plans.

Common annuity characteristics include:

• Interest earned is not taxed until payouts begin.
• Contributions to an annuity are not deductible at the time of contribution unless used as part of a qualified plan, such as a 401(k) or IRA.
• The death benefit (in the form of the remaining cash value) can be passed on to the owner's beneficiary(ies).

There are several types of annuities available. When shopping for annuities, consider your risk tolerance. Do you want a fixed guaranteed return (fixed annuity)? Or do you prefer the potential for increased earnings with some investment risk (variable annuity)?

Fixed Annuities

• Rate of return is guaranteed by the insurance provider only, not by the government.
• Tax-deferred growth allows you to defer paying taxes on your earnings until you begin withdrawals.
• Fixed and guaranteed income for a specified period of time.¹
• Unlimited contribution limits unless held in a qualified plan, such as a 401(k) or IRA.

Variable Annuities

• Invest in a diversified portfolio where returns fluctuate based on your portfolio's performance.²
• Offer the potential for a greater return with investment risk.
• Tax-deferred growth allows you to defer paying taxes on your earnings until you begin withdrawals.³
• Guaranteed death benefit secures your original investment to your heirs.
• Unlimited contribution limits unless held in a qualified plan.
• Fixed account option allows your assets to grow at a fixed rate of return.
• Tax-free fund transfers between sub accounts within your annuity.

Equity-Indexed Annuities

• Guaranteed rate and fixed payments similar to fixed annuities.
• Asset grow directly related to index performance (e.g., S&P 500, Dow Jones Industrial Index).
• Assets increase when related index increases; if index decreases, minimum rate is guaranteed by annuity provider.

It's always best to discuss with a financial advisor how an annuity might help you build additional income for retirement.

S. Raines, Sr. Financial Advisor/Tax Preparer

¹Subject to the claims paying ability of the insurer.

²Variable annuities are long-term investment vehicles designed for retirement purposes. Values and investment returns will fluctuate, and you may have a gain or loss when money is withdrawn. There may be a 10% IRS penalty for withdrawals made before age 59½. Some annuities have a forced annuity age. For more complete information on variable annuities, including charges and expenses, obtain a prospectus. Read it carefully before you invest or send money.

³There may be a 10% IRS penalty for withdrawals made before age 59½.