Annuity Funding Explained
When it comes to annuity funding and annuities in general many
people are confused. The problem is often because there are so
many different kinds. There’s single or flexible-payment, fixed
or variable, and deferred or immediate.
Regardless the type of annuity funding you’re ultimately
interested in, all annuities are financial contracts which have
been created to provide you with a good source of income in your
retirement years.
Because of the long term nature of annuity funding it’s important
you understand your options and have all your questions answered
by an expert in the field prior to investing any of your money in
a fund. The first step is to find a financial company you can
trust and then explore your options.
Annuity funding begins with deciding on what type of annuity best
suits your needs.
You can choose from a number of annuity options which include a
lifetime income, a guaranteed period income where your
beneficiaries would receive any remaining payments, a joint and
survivor option for couples as well as many other options that a
financial advisor or insurance representative can tell you
about.
In many cases, options can be mixed and matched to provide you
with the best kind of annuity funding possible.
The money contributed to any annuity funding may be in post-tax
dollars. The advantage to this is that you can contribute as much
money as you would like. However before you put any after-tax
savings into any kind of annuity funding, it’s often advisable
for you to put the maximum pre-tax amount into a retirement plan.
When an annuity is used to fund a retirement plan, contribution
limits usually apply. Federal tax laws also generally require
that you begin taking minimum distributions by April 1 of the
calendar year following the year in which you reach age 70.
Annuity funding earnings are taxed as ordinary income. It’s
important to note that if your ordinary income rate at retirement
is greater than the current capital gains rate for other
investments, you would actually pay more in taxes.
The upside is you do receive a tax deferral on any earnings.
Other investments you may have could be subject to ordinary
income as well as capital gains taxes annually, even if you
have not cashed in the investment.
Protect yourself and your money by exploring the pros and
cons of all your annuity funding options prior to committing
yourself to anything.
The bottom line is that since annuity funding is a long-term
investment vehicle you'll want to make sure that any annuity
company you select will be in business for the length of
your fund.
- Record Losses Hit Pensions of Big Firms (WallStreet Journal via Yahoo! Finance)
The nation's largest corporate pensions won't meet federal-funding requirements without a big infusion of cash, improved asset values or a change in law.
- Companies ask Congress for leeway on pension funding (Fort Worth Star-Telegram)
The companies say federal legislation forces them to tie up more funds that could be used keep people on the job.
- Funding your future retirement with annuities (Fortune Small Business via Yahoo! Finance)
Making lightweight canoes had long been a labor of love for Joel Flather, founder of Compass Canoes in Taunton, Mass. But last year, at age 66, Flather decided to sell his ten-year-old business to a larger boating company.
- Retirement annuities: Cash for life (CNN Money)
Making lightweight canoes had long been a labor of love for Joel Flather, founder of Compass Canoes in Taunton, Mass. But last year, at age 66, Flather decided to sell his ten-year-old business to a larger boating company. The transition confronted Flather with one great unknown. "We never had a pension plan at my company," he says, "so funding the future became an important issue."
- Monday newspaper report: HBOS, Easyjet, ICAP (ShareCast)
LONDON (SHARECAST) - The Treasury is considering dangling the lure of lucrative shares in the banks to pension funds and other City investors to reduce the cost to taxpayers of its bailout plan, The Times has learnt.
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