Many investors are looking for ways to protect their retirement income. Depending on the market conditions and the goals that you’ve set for your retirement, fixed, indexed or immediate annuities may be a smarter choice.
An annuity is a policy that you use to save money generally for retirement. You can make payments over time, or pay a lump sum. The money that you pay into the annuity earns interest, which is tax deferred. After a set time, that interest will earn you with a stream of income for retirement.
Immediate Annuities – With this type of annuity, you can receive guaranteed payments for life or payments made over a certain amount of time; you’ll be guaranteed to have an income for life. Depending on the tax status of your annuity, the payment can be included in your taxable status.
Deferred Annuities –With this fixed interest annuity, you can defer taxes on it. Plus, the interest received from the fixed interest annuity can help it grow larger than monies put in a taxable account. When the money is taken out of the account, the gains are taxed as regular income. Annuities can also be used to fund Simplified Employee Pension Plans, traditional IRAs, and Roth IRAs. (Income tax-deferral is provided by the retirement plan.)
Choosing the right annuity can be a formidable task and it’s not always easy to understand. Do you have the right annuity? Are you meeting the legal requirements? With all the financial jargon, it’s very difficult to choose the best annuity to meet your needs. That’s why choosing an annuity online, may not be the wisest choice.