Benefits of an Annuity

Article Taken From Valley Financial Blog
Posted by Michael Reimann

Are you thinking of how to grow your money? How does tax-deferred growth sound? What about income for life, income you cannot outlive? Flexible withdrawals and contributions? If you are still nodding your head, then an annuity may be for you. The aforementioned are some of the common benefits among annuities, which I will explain in more detail below.

• Tax-deferred growth: The taxes you pay on interest earnings are postponed until you make a withdrawal. With a tax deferred premium, your premium earns interest, the interest on your premium earns interest, and the money you would have paid the IRS stays in the policy and earns even more interest.
• Income for life: Once you purchase an annuity you can choose for the insurance company to provide you with a series of payments that can be guaranteed to last for the rest of your life. Even if you live longer than the insurance company anticipated, they are obligated to continue the monthly payments for as long as you live. Annuity payouts can also be customized to fit your needs. You choose how often you want to receive the payouts and for how long, which will affect the dollar amount of the payment. The paychecks can even be structured so payments continue to your spouse or beneficiary after you die.
• Flexible withdrawals: An income stream for life is one option when you begin withdrawals from your annuity, but there are other alternatives. You can take a lump sum or make withdrawals when you need the money. You can even leave the money to continue growing tax deferred as a reserve for unexpected expenses or as a legacy for your heirs. However, keep in mind, annuities are still subject to required minimum distributions.
• Flexible contribution: Federal law typically limits the amount you can contribute to many tax-deferred retirement programs such as IRAs or 401(k) plans. However, annuities are subject only to the particular insurance company’s contribution limits.

Annuities have come a long way since their inception and the above are some of the commonalities among annuities. Additional aspects vary depending on the particular annuity itself and the insurance company’s guidelines. Therefore, choosing the right annuity is very much a case-by-case decision, based on one’s objectives, goals and concerns. For more information on choosing the right annuity for you, contact me - Michael Reimann at 480-214-9897 or at mreimann@valleyfin.com.