Annuities and Your Financial Strategy

Annuities and your Financial Strategy

Adding annuities to your financial strategy will help defer paying taxes on a larger amount of money. Retirement and non-retirement annuities come with no contribution limits. This means, you can put away more money for retirement than you can with a 401(k) or IRA.

Annuity Types

Two basic types of annuities exist: immediate and deferred. An immediate annuity will allow you to receive payments very soon after you make an initial investment. These are often purchased when you are closer to retirement age.

A deferred annuity will allow you to invest money over a period of time before you take withdrawals. Usually, you will not take any withdrawals until retirement age. This type of annuity will accumulate money, while an immediate annuity will pay out.

Deferred annuities maybe converted into immediate annuities when you are ready to start collecting payments.

Within the categories of deferred and immediate annuities, you will also find fixed or variable options. This will determine whether the amount paid out will be a fixed amount or based on performance of the market and investment. The best option for most situations is a fixed annuity over the variable annuity.

A fixed annuity is an insurance contract with fixed dollar amount payments to the annuitant for the length of the contract. The insurance company will pay a fixed amount of money until the annuitant dies, in most cases.

A fixed-indexed annuity grows at the greater of the return from the specified stock market index or the annual, guaranteed minimum rate of return. In both cases, the amount will be reduced by expenses and certain formulas.

Find out more about the different types of annuities and how they can help you by contacting Thomas & Associates today.

Why should you get an Annuity?

There are several reasons to get an annuity with the main advantage coming from the tax benefits. Unlike other retirement plans, such as IRAs and 401(k)s, you won’t be limited with your annual contribution. You can invest as much as you want in an annuity, while deferring paying taxes on the money.

The money you invest will compound over the years without any taxes needing to be paid. This allows every dollar you invest to continue to work for you, which is a huge advantage over taxable investments.

Retirement Benefits

Annuities provide several benefits once you retire. It’s a great way to save towards retirement and ensure you have a regular source of income once you retire.

When it’s time to cash out, you will have the option of taking payments or a lump-sum from your annuity. Many retirees prefer to set up guaranteed payments for a certain number of years or for the rest of their loves. This allows for a steady stream of income during retirement.

The professionals at Thomas & Associates will happily answer any questions you may have about annuities. Contact us today and find out how we can help.

Starting an Annuity Under the Age of 50

If you’re under the age of 50 and you want to start an annuity, you should consider your financial situation and the long term goals you have for retirement. It doesn’t make sense for a younger person to start an annuity if they don’t have many liquid assets because of the penalties you may have to pay to withdraw money early.

However, if you are financially stable and you are looking for a way to start saving towards retirement, an annuity may be a very good idea. Maybe you’ve already maxed out the amount you can contribute to your 401(k) or IRA. If this is the case, an annuity may be the next type of savings for your retirement.

If you’re considering starting an annuity, regardless of your age, contact Thomas & Associates and let one of our trained professionals assist you today!

Top 5 Reasons to Buy Annuities

  • Safety Features – Annuities provide alternative vehicles which have contractual guarantees that can insulate the owner from outliving their income, even if they deplete their "bucket".
  • Potential Account Growth – growth potential in an index annuity is in the double digits with a historical growth record around 6% per year.
  • Tax Advantages – annuities will provide options that may be used to minimize many forms of taxation for non-qualified money.
  • Lifetime Income – today have an average life expectancy of approximately 85 years old and it’s predicted that by the year 2030, more than two-thirds of the U.S. population will be above the age of 60.
  • Legacy Design – Generational Wealth Transfer can be accomplished with tax efficiency and tax advantages.


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