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Common
Benefits
All
annuities, fixed or variable, share several common benefits. Here's
a summary of what annuities can bring to your retirement portfolio:
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Ideal for Estate Planning |
Proceeds
from annuities pass directly to your beneficiaries without the delay,
expense, and publicity of probate in most states. If you've ever had
a loved one's estate go through this time-consuming legal process,
you know just what kind of advantage this is. |
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The Power of Tax Deferral |
Because
you do not pay taxes on earnings every year, your annuity is able
to work harder thanks to tax-deferral. You will have to pay taxes
on earnings when you withdraw your annuity's gains, but at least you
can decide when that happens. |
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No Contribution Limits |
Contributions
to other retirement savings vehicles, like 401(k)s and Individual
Retirement Accounts, are strictly limited. Annuities, however, offer
tremendous flexibility. You can contribute as much as you want, up
to the limits imposed by the insurer, to take advantage of tax-deferral
or variable accounts inside the annuity. Plus, you can add to your
annuity contract at any time. |
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Flexible Payment Options |
Unlike
401(k)s and IRAs, which require that you begin making withdrawals
at age 70 1/2, you may be able to wait much longer with annuities.
When you do decide to begin receiving payments, you can usually
select one of the following methods:
- Lump
Sum distribution (a one-time payment)
- Periodic
distributions (you can take money only when you need it)
- Systematic
distributions (a fixed or variable amount is sent to you at regular
intervals)
- Annuitization
(fixed or variable payments, guaranteed for the rest of your life)
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Tax Control |
The
money inside your annuity is made up of two components -- principal
and earnings. Assuming your annuity was opened with after-tax dollars,
you're only taxed on your earnings.
Different
distribution methods behave differently when it comes to taxes;
for instance, Lump Sum, Periodic, and Systematic distributions exhaust
all earnings (which are taxable) before tapping principal. Under
annuitization, each payment consists of both principal and interest,
spreading your tax liability evenly among payments. Through these
distribution options, you have complete control over when you will
pay taxes on your earnings.
Annuities
are not perfect when it comes to tax control. If you should pass
away while your annuity is accumulating, all deferred taxes on your
growth will become due, reducing your annuity's value.
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Easy To Start and Maintain |
Usually,
a simple application, a check, and your signature begins your annuity.
And, at the end of each year, you will not receive a 1099 for income
earned within your annuity contract. That's one less thing to worry
about when April 15th rolls around. |
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Other Features |
Annuities
also do not offset Social Security benefits like bond, CD, and other
investment income does.
Annuities
are easy to establish and often come with a "free look period."
Your state of residence or the annuity contract will define a length
of time (usually 30 days) where can cancel your contract if you
decide it's not right for you.
You
can even exchange older, non-performing annuities into a newer fixed
annuity with no tax consequences, thanks to Section 1035 of the
Internal Revenue Code.
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If
you are a conservative investor looking for a consistent way to
build your retirement savings, then fixed annuities may be the answer
for you. However, if you are financially savvy and believe you can
do better choosing your annuity's direction, variable annuities
offer you much greater flexibility and control.
The
best way to determine which annuity is right for you is to talk
with an experienced Annuity
Specialist.
As
long as the money you contribute to your annuity is destined to
be used only at retirement, annuities can make a significant impact
in the growth of your own nest egg.
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Contact
SaveWealth today to be put in touch with one of our annuity
experts. You'll learn about the latest annuity features, and be
able to determine whether annuities are right for you.
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There
is a surrender charge imposed generally during the first 5 to 7
years that you own the contract. Withdrawals prior to age 59-1/2
may result in a 10% penalty, in additional to any ordinary income
tax. The guarantee of the annuity is backed by the financial strength
of the underlying insurance company. Investment sub-account value
will fluctuate with changes in market conditions. |
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