One of the things that scare the annuity buyers away is the penalties the IRS might apply to them in their annuitization. Add the taxes, the charges, and the fees in the equation and you will have a displeased output about annuities. However, keep those worries away because everything has a solution.
Fixed annuities or any kind of annuities for the matter help the annuitants to stay away from the Income Revenue Services (IRS) until the withdrawal periods. Being penalized by it is a big deal, really. Who wants to have his or her income deducted at some point in time? Probably no one. And that is the whole point of this article. How can a person avoid a 10% to 30% penalty from IRS in his or her IRA?
The most common penalty annuitants encounter with IRS is the 10% penalty due to a premature withdrawal. Annuities are designed to pay the annuitants a lump sum of money or a periodic stream of income after the retirement period of a person. That is specifically at the age of 59 ½. If an annuitant withdraws before this age, that is when the penalty of 10% will charged on his or her income account.
Some annuities and mostly all annuity companies, give withdrawal privileges like a 10% interest rate withdrawal from his or her account once a year. The IRS penalty of 10% will again appear if the annuitant withdraws an amount exceeding the limitation given. Generally, that was all the annuities have to deal with IRS. But how about the other investments plans aside from fixed annuities in regards with a person’s retirement? What is its deal with the IRS penalties and taxation?
Taking control of your finances is more crucial than ever. Retirement plans are all over the globe. IRAs and 401ks built a huge name in the investment industries. In 401k, the IRS is bound to take out 20% of your assets away from you when you choose to withdraw a lump sum of your income. In addition, the tax deferral benefits offered in some annuities do not hold another tax deferral benefits to tax-qualified accounts like IRAs and 401ks. If you happen to purchase your investment plan in IRA account, the IRA custodian and not the insurance company will be responsible for all tax reporting with respects to the annuity. IRAs and 401ks seem to sound great but clearly, it is not exempted in IRS’s power.
Choosing how you to save for your retirement is up to you. However, you must always look out for the taxes. Do you realize the fact that the taxes nowadays are taking a roller coaster ride? It has its ups and downs for some time. Sadly, for most of the times, it goes up rather than down. Whatever account you wish to take, it is always a must to ask your custodian, agents or anyone knowledgeable and liable in handling matters regarding the tax consequences of annuities. It is better to prevent having a penalty from the IRS than to tolerate being penalized. Why so? Your main goal is to prevent the heavy burden of taxes in you and to save your income for your future use. There is no use if you cannot maintain that thought because if you will periodically break the set rules and standards in your annuity contract and be a total costumer of IRS penalties, a very huge amount of money will be lost.
There are no such thing as perfect strategy in saving and investing. However, penalty avoidance is a great leap in having a close-to-perfect annuity plan.