Recently, we've been receiving many questions from people uncertain about the purpose of an annuity. Even if you understand the concept of annuities well, do you know if one would be right for you?
Annuities are a term that a lot of us have heard but few of us really understand. So, let's clear the air about this important topic...
Officially, annuities are a "tax-deferred savings vehicle that can later be converted into income." For some of us, it is easier to think of an annuity as being like an IRA...
The money you put into an annuity grows without being taxed until you withdraw the funds, just like an IRA! Also, the money needs to be withdrawn by the time you turn 70 1/2 (just like an IRA) and should not be pulled out before you turn 59 1/2.
Sounds like an interesting option, right? So what about the different types of annuities?
Well, annuities can come with all kinds of bells and whistles so the number of annuity flavors is almost endless these days. Many options even guarantee that you won't lose any money, regardless of whether the stock market goes up or down (an important consideration in this economic climate!).
With these facts in mind, you can see why annuities may be enticing...
So, as with any financial decision, you'll just want to make sure you learn about your options before investing. You may also be wondering when an annuity is right for you?
Well, the majority of people for which an annuity makes sense are those who are able to save more than a typical IRA or 401(k) will allow each year. Typically, those who are still working can avoid a significant amount of taxes by putting some savings into an annuity and these savings will be targeted for retirement rather than shorter-term purchases.
So, is the idea of an annuity starting to make more sense? Do you have more questions? If so, please feel free to contact us if you'd like to explore the idea further.
All of us here at Hill & Hamilton wish you and your family continued financial success.