Annuities – The Good, The Bad, and The Ugly
By Martin A. Federici, Jr., CEO of MF Advisers, Inc. & MF Tax & Accounting, Inc.
Annuities are a great investment vehicle for retirement for those who want to save extra above & beyond the limits of IRAs and 401(k)s/403(b)s, and they have some interesting features that can make them very advantageous.
Here are some of the benefits of annuities:
There are 2 main types – deferred and immediate annuities – depending on how soon you need to start receiving income
No limits on contribution amounts – you can put away as much as you need to, which is especially helpful for those who need to play catch-up if they are over age 50 & have not saved enough for retirement
Savings grow tax-deferred and your earnings are taxed at your current regular income tax rate when making withdrawals (after age 59 ½)
Depending on how much risk you need to take, you can invest in fixed, variable, and/or equity-indexed annuities
Depending on the types and features of your particular annuity, you can take a lump-sum payment or receive income over your lifetime or a specific period of time
There are also some possible disadvantages with annuities though:
Sometimes these annuities (especially variable and equity-indexed versions) can carry high expenses in the form of annual fees, policy riders, commissions, and surrender charges, making them cost-intensive
You can often give up control of when you can take your money back out of an annuity without incurring a surrender change
Withdrawals from annuities before age 59 ½ are not only subject to taxes, but also a 10% early-withdrawal penalty
If you buy an annuity from an insurance company, you are at the mercy of the claims-paying ability of that company (be sure their credit rating is at least “A” or better)
Find an experienced financial advisor who often deals with annuities, works for an RIA firm, earns his/her money from fees (NOT commissions), believes in having an abundance of investment choices for clients, and has the heart & demeanor of a teacher, NOT a salesman, and chances are you’ve found the right financial advisor to help you prepare and plan for retirement.
For more information, please visit https://www.mfadvisers.com, email marty@mfadvisers.com, or call (570) 760-6524.
About MF Advisers, Inc.
MF Advisers, Inc. is a full-service, fee-only RIA firm and fiduciary based in PA & FL specializing in 403(b)s, 529 college savings plans, wealth management, investment advice, and financial planning (including retirement planning).
With 25+ years of licensed experience, over 10 years of professional education, and an unwavering commitment to improving your financial situation, MF Advisers, Inc. is the advisory firm to best serve YOU.