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What Annuity Taxation Is And How Does It Works

When you are looking for a great way to invest your money, you should make an effort in learning about annuity. For example, some people might have the notion that this type of investment helps you evade taxes. This way of thinking is true in some aspects but not entirely. It is true that you will not pay taxes on the interest that your money earns during the accumulation period. Therefore, your money grows at a rate that is higher than that of a taxed method of investment. This type of annuity is called the deferred annuity. However, it comes to the point as agreed on the insurance contract when you start withdrawing your money. This is the time that you will start paying some taxes. Nevertheless, how does it happen?

To begin with, you have to know that there are two ways of receiving payments from this scheme. You can receive them in a single lump sum or as periodic payments over an agreed duration. The latter is referred to as annuitization in professional terms. You need to learn about such terms in the process of knowing what is annuity.

With the option of receiving a lump sum, you will pay taxes on the interest amount. Therefore, you will get the money you deposited into your account in the same amount. The argument is that this money had already been taxed before you put it into this scheme; hence there is no need for a second deduction. However, all the interests gained will attract some taxes. Moreover, it would be incorrect to predetermine these deductions. This is because the value will be computed with the current income tax rate.

With the case of annuitization, computation will be almost the same with the above scenario. Every amount that you receive will have a portion of your principal plus the gained interest. The periodic amount is a result of dividing your principal amount by the total number of payments that you will receive. However, for the amount that will be in addition to the principal payment, you will have to pay the ordinary income taxes at the current rate. The same case will apply to the variable annuities. This is despite the fact that they will gain interests at a changing rate.

On the same note, if you understand what is annuity, you will know that there is the possibility of naming a beneficiary. Therefore, what is the tax policy for the payments made to this person? The beneficiary will receive tax-free money up to the time that all payments equals the amount invested by the deceased. However, for the amount gained during the accumulation phase, the beneficiary will be taxed at the rate of any other income.

In the event whereby the annuitant passes on before receiving any payment, then the beneficiary will be subject to taxation as per the terms and conditions. This is irrespective of whether the payments are made as a lump sum or as periodic payments. In the case of a lump sum, he will pay taxes on the money that is gained on top of the principal amount. However, if he will receive periodic payments, then taxation will begin after this principal amount is fully settled. Taxes are imposed just as they are on ordinary income.

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What Annuity Sells and The Factors to Consider Before Making The Transaction

There are times when life takes some unexpected twists and turns. In the event whereby this necessitates the use of some money which you do not have, you will have to liquidate your assets. One of the assets you could be having as an investment in annuity. The question is what are some of the reasons that could make you sell such an investment?

FindAnnuitiesTo begin with, you could have the need to buy a new house or to furnish the current one. In most cases, this will need a huge amount of money which you might not have. Moreover, you will need to have this money for you either to make the down payment or to pay for the house fully. If your only investment is the annuity, getting this cash can be a challenge. Therefore, you can sell the remaining part of it to a willing buyer. Secondly, you could be in tough economic times which eventually force you to borrow money from institutions or friends. However, being in debts is an embarrassing thing. Knowing what is annuity selling and having part of them that may help you to avoid these shameful moments. Thirdly, you could want to take some academic course or to pay up for your kid’s school fees. There may be other means of paying this bill such as taking up a loan but the one of the best option would be to sell your annuity. Fourthly, you could identify a business opportunity in which you would like to invest in. In this situation, you will need the capital to get started with the business venture. Hence, you can get a court order to allow the transfer of your investment to another person in exchange for an agreed lump sum.

As much as you might be in need of some money, you cannot make a hasty decision. You have to ensure that you are making a legit transaction that will not make you regret later. The first thing you need to do is to decide the payments that you will be disposing as well as they payment’s dates. With these information, you will be able to give your buyer complete details. Moreover, with these details you will be able to get the necessary documents to facilitate the transaction.

Since you understand what is annuity and the various terms used in the contracts, you should ensure that the buyer makes the correct reference in the purchase contract. If you want to sell only a portion of your investment for retirement, it would be a bad thing to find out that you have sold a larger one than you intended.

The third aspect that you have to consider is the rate of discounts. This process will enable you to determine a fair price for your investment. This might be a hard thing to do as an individual. However, there are firms that help in these transactions and outsourcing one of them can help you secure a good deal.

Sometimes you might find that someone will make an offer for your settlement but will include some fees. These fees can bring down the cost of your investment option and render it worthless. These fees could be from the institution handling the transaction. Therefore, you should do some research to ensure that the firm handling your business is professional.

Simply enter you zip on the top of this page to compare annuity rates for free!

What Annuity Is And How To Gain From It

It’s a good thing to discover what is annuity and how you can always gain from it. If you’re not properly informed about annuity, you’ll certainly be deformed. There’s always the need to discover what the subject of annuity is and how you can go about benefiting from it.

In simply language, annuity is a contract between you and an insurance company. You simply invest your lump sum in the company while the company pays you a certain amount of income on an agreed date.   In most cases, annuities are meant for ensuring steady flow of income during retirement.  You don’t need to wait until you retire before you start investing in annuity. There’s always the need to prepare ahead of time before you retire.  Oftentimes, retirement doesn’t announce its arrival. It can come upon you at any time. You must be adequately prepared to face the financial challenges that come with such period.

In getting to know what is annuity, you need to explore its various kinds. Basically, there are three kinds you must know. They include fixed annuity, equity index annuity and variable annuity. Each of them has its pros and cons. You need to discover a lot about them before you invest.

There are also two major categories of annuity. They include immediate annuity and deferred annuity. They are seen in the three major kinds of annuity mentioned above.  A variable annuity can be immediate or deferred. A fixed annuity can also be immediate or deferred. The same scenario applies to equity index annuity.

Basically, immediate annuity of whatever form will always give you the opportunity of receiving income payment regularly once you’ve made the initial purchase payment. You can start receiving the income payment right from the very first month. You also have the freedom to choose when to receive the payments on regular basis.

On the other hand, deferred annuity gives you the room to allow your investment to grow over a period of time.  You simply watch the investment increase in leaps and bounds.  The income payments are usually made on a future date. You can decide to receive payments after so many years when your investment must have grown.

Again, there’s also another investment option in annuity. It’s known as Lifetime annuity.  This kind of annuity gives you the opportunity of receiving payments all through your lifetime.  The payment may even continue after your death. Your beneficiary will keep on getting the payment   as agreed. However, you’re no longer going to have the initial purchase payment back. It belongs to your insurance company.

From the above, you must have known a lot about what is annuity.  However, you shouldn’t stop there. You still need to take some time to make proper inquiries as regards the insurance company to work with. There are many of them in every state of the US. You need to check the various offers such companies have and how best to benefit from that.  You can gain more when you engage the services of a reliable financial adviser to assist you.

Looking At Annuities As Income Vehicles For Retirement

Your retirement period can be very enjoyable if you plan it very well ahead of time. While still in the active service, there’s the need for you to save some cash for future retirement.  Saving some cash in the bank is a good idea but the truth is that, you can easily spend it once there are urgent needs.  You can avert this kind of   problems when you invest your money in annuities.  It’s important you know what is annuity before thinking of making your investment.

To simply put, annuity is a contract between you and an insurance company. You invest a lump sum in the company while the company uses your money for investment. In return, the company pays you a regular income on agreed date.  The payout varies according to various types of annuities and the insurance companies that offer such investment opportunities.

Basically, there are various kinds and categories of annuity you can always invest in.  Among the types include fixed annuity, equity index annuity and variable annuity. These three also fall under two main annuity categories namely immediate annuity and deferred annuity. If you want regular and fast income payment right away, you have to opt for immediate annuity. On the other hand, deferred annuity helps you to get your payment at a future date. In most cases, your investment will continue to yield income   within the period.

Well, it’s good you know that annuities are great income vehicles for retirement. If you’re planning to retire, you need to go for any of the annuity types that can suit you. There’s a lot you stand to gain when you go for them.  You’ll never have a reason to lack funds when you retire.

There’s the need to invest wisely when looking for annuities. Each type of annuity comes with special features.  Each one also has its pros and cons. There are various charges you’ll pay in some of the annuities. There are also some hidden charges. In most cases, the charges depend on the insurance company you’re dealing with.

To make the most out of annuities, you need to be properly informed. In the US, there are several insurance companies offering all kinds of annuities. You don’t just choose any one of them you see. You must take some time to study about the companies and how they operate. You need to know what is annuity in all aspects before thinking of signing any contract deal. This saves you from   wrong investments.  If you invest wisely, you’ll reap a bountiful harvest.  If you also invest wrongly, you’re sure to lose your hard-earned money.

There’s always the need to be well informed when looking for annuity investment opportunities. In the US, there are several insurance agents that can come to your aid. There are also financial advisers that can also help you out. You need to request for their services if you really what to benefit from annuities. You’ll always maintain a steady flow of income when you have the right annuity working for you.

Choosing Between Immediate Annuity or Variable Annuity

An annuity is an insurance product that is a retirement strategy. Annuities are in demand by investors desiring to get secure income after retirement, be it in amounts in bulk over a certain time without any associations with market fluctuations, or plans which pay according to ups and downs in the world’s financial scenario. First, what are the available options to investors? If I am a prospective investor, I may avail an annuity which may be fixed or variable as mentioned before. They may also be deferred or immediate. A deferred plan waits and builds up my return structure after my retirement, till the time I actually need its assistance. When I take the help of an immediate annuity quote for a financial future, I start receiving returns irrespective of whether I do have another source to pay my bills or not. It may be perfect if I am already struggling with my income and have no other options or retirement solutions.

On the other hand, if an immediate annuity does not suit me, I may wait till I really want to retrieve help. For people who do not anticipate an extremely long life (which is exactly what the principle of annuity delves upon), a fixed annuity may not pose a problem. But if I do, and I retrieve a fixed and immediate annuity, I may have very less left to provide myself with, when the value of the prefixed amount of cash buys virtually nothing, say, 35 years later. In other words, inflation may pauperize me. An immediate annuity quote begins early, which means it leaves less for later years. A variable annuity solves the problem of lower market worth.

Unlike their fixed counterparts, variable annuities are designed to pump up savings by giving a chance for long-term capital growth. Because of the growth potential, a variable annuity may be more likely than a fixed annuity to outpace inflation. Of course, it is not without its attached problems. It may increase my income over the years, but on the other hand, it may reduce it as well. Monthly fluctuations may not be a good option for many, especially if I like to plan my expenditures beforehand. The question of exact budgeting does not arise if I do not know what amount of cash I will have in hand. If unfortunately I die too soon, I will not have the optimum benefit of my investment for I could have well served my purpose by opting for fixed monthly returns.

Therefore, if I want my money to flow in fixed amounts regardless of how long I live. I believe it would suffice me- an immediate annuity may be a good option. But if I know my finances well and I may live to a time when inflation may burn out everyone’s notes, I’d be wiser if I trust a variable annuity quote.

Typing in your zip on the top of this page and answering our limited and easy questions gives you access to different annuity providers and rates for FREE!

Annuity for Retirement: Understanding Variable Annuities for Dummies

Annuity for retirement probably the most prudent decision you will make for yourself and your future. It is important that you start investing your money now. One of the investments that a future retiree may consider for his / her future is variable annuity.

Variable annuity is an investment instrument offered by insurance companies for a minimal insurance.

Variable annuities are classified according to deferred or immediate. The deferred annuity will need at least five to ten years before you can withdraw your money while with immediate you can arrange with the company for you to get money right after you deposited the first payment. Most people who are already near the retiring age chooses the immediate so they will not have to wait long to get a money.

Pros and Cons of a Variable annuity for retirements

According to financial advisors, variable annuity is beneficial since it is not yet taxed during the entire period of the contract. The only time that it will be taxed is when you decide to withdraw the money. In the case of variable annuity, the ideal age to withdraw is 59 ½ years of age. By this time, you can withdraw the money and you will only be taxed more or less with 39%. It means you will only be taxed with thirty nine percent after 15 to 22 of saving your money in annuity. This process is much favorable to annuitant compared to mutual funds since the latter is always heavily taxed.

The only disadvantage for variable annuity is that early withdrawal may cause penalties. The penalty for early withdrawal may be high and may hurt your savings tremendously so make sure that when you purchase a variable annuity, you are ready to wait for several years before you can get hold of money.

Variable Annuities for Dummies

The money that you save in annuities is then reinvested by insurance companies to other investment instruments like bonds and securities. Since it covers securities and bond, annuities are under regulation of Securities and Exchange Commission and those who sell annuities should be licensed by Securities Dealers.

Since variable annuity involves securities, it is important that an investor knows that like any other investment, there might be some risk of loss.

To lessen the risk of loss, the investor is given a chance to select a number of funds during the accumulation stage. The investor will decide where he or she wants the money to be invested. As the annuity owner, you may choose to put in one premium all your money or to divide them in series of funds.

When the distribution period begins, the annuitant will be charged with series of taxes, which may equal to at least thirty-nine percent. The annuitant will decide if he or she wants to get lump sum money, which can be up front, or you will decide to divide the money for at least different payouts. The exact value of the annuity may differ from the invested money and the life expectancy of the holder.

To know more about variable annuity and get the best rates, you may get a free quote today by entering your ZIP on the top of this page and answering some basic questions.

Preventing The IRS From Affecting Your Benefits

Using an annuity for retirement purposes may be a very good way to prevent the Internal Revenue Service from taking large chunks of your retirement benefits or large amounts of income due to you in lump sums. This can save you thousands in tax dollars, while increasing the value of the original amount you have invested. Learn how to do this by reading through to the end of this article.

Shielding the IRS from your Retirement Benefits

Most states within the United States levy a tax on pension income or other types of retirement benefits. In some cases, these rates are almost 20% or more leaving the retiree feeling cheated. While some states have retirement income friendly laws, some have tax levies of between 20% and 30% for such incomes. Do not think of moving to the friendly states yet, as annuities can still be of help in your current location.

These tax dollars could be prevented by directing the overall retirement income into an annuity plan, which will also generate money for you in the coming years. One type of annuity that can help in this regard is an immediate annuity as this plan allows retirees to access payouts soon after the lump sum payment is made. The other great thing about annuities is the fact that the principal invested is not subject to any form of taxation, except the interest earned on the actual investment.

Tax Benefits of Annuities Compared to Other Investment Plans

If we take a look at annuities in comparison to other financial investments, we will notice that annuities offer income increase while also deferring tax payments for long periods of time. In addition, they also offer the lower risk since the principal investment and a specified amount of income is usually guaranteed for certain number of years. For instance, stocks and bonds are bound to fluctuate in line with market prices while the dividends accrued are also taxed.

Also, annuities are the only type of investment plan that is easily converted or used as a retirement savings plan, whereby you get fixed or variable payouts for a number of years or over your entire lifetime.

However, great care must be taken before you conclude on using an annuity for retirement plan, especially in a bid to reduce your tax exposure. It is important that you look through the different deals available on the market from different annuity plan providers. Also, you have to compare rates and read the attached terms and conditions before making a decision on the type of annuity and particular provider.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.

Key Terms To Know To Effectively Use Fixed Annuity Calculator For Your Annuity For Retirement

A fixed annuity calculator is a computer tool, mostly in form of a spreadsheet that helps an investor calculate his returns from his fixed annuity for retirement plan after a period of time. If you are keen about knowing exactly how much you can or will make from your investment, then a fixed annuity calculator is the right tool you need. By using a fixed annuity calculator, you can be properly guided in your decision as to which financial product best suits your needs or fits into your plans for your annuity for retirement.

Thanks to the calculator, financial decisions have become clearer and more comprehensive. Licensed insurance agents are now able to convince potential customers to buy their products with the use of the calculator as they can quickly demonstrate the benefits of their financial products to them. It should be noted however that even though annuity calculators are very useful and important, they should never take the place of an investor’s good judgment and discretion.

Some very important variables must be provided to enable the calculator compute the values that will help you with making the best decision. These include the investor’s age, the initial principal amount invested, the interest rate, the length of time between investment and first payment, and the amount paid monthly etc. We have outlined below some of the key terms that you need to understand in order to effectively use a fixed annuity calculator.

•             Annuity: is a product obtainable from an insurance company that gives investors an opportunity to invest a particular sum of money to be withdrawn at a later date after a period of time.

•             Fixed annuity: is a type of annuity in which the investor has the option of getting payments or making withdrawals after a relatively short period of time, say one month or, making a lump sum withdrawal at the end of a longer time period.

•             Current Tax Rate: is the tax rate that is applicable if you were to make withdrawals now, as compared to taking payouts at a later date.

•             Retirement Tax Rate: is the expected tax rate that would be applicable when you make withdrawals at retirement.

•             Surrender Charge: is the percentage of your annuity value that you would be charged if you make withdrawals earlier than expected.

•             Initial interest rate: is the guaranteed interest rate that you can receive for the annuity at the beginning of the plan.

•             Current Age: is the investor’s current age.

•             Withdrawal Age: is the age at which you are allowed to start withdrawing funds according to the contractual agreement.

•             Number of pay periods: is the number of times you can make withdrawals.

Our fixed calculators can compute and compare values obtainable from investing in annuities to that of other investment plans. Prospective investors can find fixed annuity calculators online as provided on the links below.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.

How Annuity for Retirement Can Help You Avoid Taxes

It is always wiser to make plans for retirement much earlier in life. The earlier it is the better it can be. Most employees in the US have a traditional 401k retirement account with their employers into which they save a particular percentage of their income monthly. There are different plans under which the employer deposits money into your account too. After many years an employee would have undoubtedly have saved a huge sum of money in his company’s retirement account. All the time the money is accumulating, it is tax free and most of the time, it cannot be withdrawn until one attains the age of 59 ½ years, at least not without penalties.  The big day finally comes, you are retired. Then you can begin to think of using the money in your retirement account saved over the years.

Another scenario is that you have to change jobs. In this case, you have two options. Its either you leave all the money you have saved with your previous employer to keep growing while you create another account with your new employer, or you transfer the lump sum to a new account. If you change jobs frequently, that means you will have to manage several 401k accounts.

The question of what to do with the lump sum in your company retirement account arises. Money withdrawn from the account attracts a tax deduction by the United States IRS. Lump sum withdrawals attract a deduction of 20% in taxes. Another 10% is also deductible as state income tax. If you are leaving the money behind for your loved ones, it will also attract tax deductions that might be burdensome to them. If you are making withdrawals from your account before you attain the age of 59 ½ yrs, it attracts a penalty charge of 10%.

The question then arises. Is there any way to avoid the inevitable tax deductions applicable to your company retirement account when you make withdrawals from it? The answer is yes! You can evade the tax deductions applicable to your company retirement account by either moving the funds into an annuity for retirement account or establishing a direct rollover IRA account. You can deposit the lump sum check from your company’s retirement account into these accounts. This way, your savings will keep growing and the good part is none of it will be taxed! An annuity retirement plan professional will be of great help to you when making this move!

Some companies now offer their employees a Roth 401k retirement account instead of the traditional 401k account. The major difference is that in the 401k account, the money you save has not been taxed but will be taxed in the future when you finally make withdrawals from the account. The Roth 401k account on the other hand allows you to save a part of your income after the taxes have been deducted. That way, the money will not be taxed again when you make withdrawals at retirement.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity for retirement plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.

How Annuity Calculators Can Help You Determine Your Annuity for Retirement

As you look forward to an enjoyable retirement, it is important that you invest in a financial product that will grant you the best retirement income protection. An annuity for retirement purpose may be a very good option and we can offer you tools that will assist you with calculating how much retirement income you would require or how much you will need to invest to achieve certain payouts later.


A lifetime annuity calculator is a very good tool that may assist you with planning and investing in the type of annuity that will meet you personal needs in addition to comparing rates from different annuity providers. To begin with, you will need to provide some basic personal information including your age, proposed investment amount, minimum payout expected, and minimum length of payout period etc. After inserting these figures into the calculator, depending on the type in use, you will get near accurate information as to how much you can receive from a specific principal over a specific number of years.

On some occasions and with your consent, an annuity expert might contact you to request more personalized information regarding your actual circumstances. For instance, a retiree with additional social security benefits might qualify for higher rates in comparison to a retiree without any additional benefits. Based on the results from the calculator, and any discussions with experts and other users, you will have a good understanding of how much you need to invest to meet your desired post-retirement needs.


The annuity calculator is a very good tool that assists young workers and intending retirees due to the fact that its results are quite reliable and aids with planning for the future. These results are also backed up by the fact that payouts from annuities are mostly guaranteed, and not affected by the kind of swings experienced in the stock market.

To compensate for inflation over time, it is also possible to invest in an annuity that has an integrated Cost of Living Adjustment (COLA) index. With this type of annuity, your future payouts will be adjusted in line with your proposed living expenses. The annuity calculator can also assist with getting the impact of COLA on your required investment amount.

In conclusion, when considering an annuity for retirement protection, you should consider consulting a free calculator online or an expert in order to get a good grasp of how much investment is required in line with your individual circumstance.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.