Retirement Planning: IRAs + Annuities
Managing finances can sometimes be a daunting task. When planning a financial future, it’s best to know all available options. Future planning involves learning how to properly invest money, feeling secure in those investments, leaving people with enough money to live out their retirement plans.
What is an IRA?
“IRA” stands for independent retirement arrangement and tax-deferred investments financial security when a person retires. There are two types of IRAs, traditional and roth.
- Traditional IRAs: individuals who contribute to taxable compensation or filing jointly with a spouse; age limit was once restricted to 70.5 years but has opened up in recent years; qualified deductions can be made if they qualify
- Roth IRAs: individuals can contribute at any age or filing jointly with a spouse; contributions are not deductible
According to the IRS, contributions vary from year to year, but the rules between traditional and Roth IRAs are the same and based on age. Both types of IRAs allow money to be withdrawn. Some contributions and distributions may or may not be taxable and follow the Tax Day deadline for contributions for tax return purposes.
What are annuities?
Annuities are insurance products that people can purchase as investments to provide guaranteed income for life. Risk is transferred from the investor to the insurance company to help that guarantee.
So, how do annuities work? There is a contractual agreement between the investor and the issuing insurance company where a lump-sum premium is converted into a revenue stream that is planned to outlive the investor.
What is involved in purchasing annuities if all risk falls on the insurance companies? Well, there are many, the most notable being fees for investment and surrender periods of time where money cannot be withdrawn by the person in contract. Some baseline entities to purchasing annuities include:
- Look-free period: time in which a buyer can cancel the contract without fees from the insurance company
- Beneficiaries: upon death of a person in contract, listed people will take over
- Rider: Specific amendments to individual contracts set by buyer
- Fees and commissions: various charges associated with each annuities
- Taxation: IRS gives favorable tax breaks on annuities
IRAs and annuities are complex insurance products that can lead to great rewards. Retirement planning can be complicated so it’s important to work with someone who understands what’s important to you. Nickerson Insurance Systems, Inc. knows how to best invest money for the greatest return for retirement with both IRAs and annuities.
Who buys into IRAs and annuities
What kind of people should invest their money in IRAs and annuities? People who have a steady income with money to set aside for retirement are the best candidates for buying IRAs and annuities. Retirement planning should not put a strain on a person’s daily financial habits, but should be budgeted into saving plans whenever possible. This is why meeting with an insurance agent is the best route for making the decision on what’s right for you.
Want to learn more about IRAs and annuities? Nickerson Insurance Systems, Inc. has answers to all your questions
Retirement planning can get complicated, but we are here to help simplify it and ensure your money is invested properly to get the most return. Whether you’re just starting your first job or close to retiring, it’s never too early to start saving for retirement.