But by its design an annuity works a little differently. An annuity offers guaranteed income for life, if you choose it to work that way. And you invest money into it same as you would any other money market account, like a 401k.
This is particularly likely for women, according to a recent report by New York Life Insurance Company, who traditionally endure a significantly longer retirement than men despite weathering the same economic conditions beforehand. The company said that women accounted for 64 percent of customers with fixed immediate annuities in 2009.
Life insurance can be provided as an incidental benefit under a tax deferred annuity plan. It is provided on much the same basis as in a qualified profit sharing plan and subject to the same limits. Covered employees will have Table 2001 (formerly P.S. 58) costs to report as taxable income, as in a regular […]
Simply, an annuity is a periodic payment to stop at a specific time or date but continue throughout a fixed period. The income paid out may be received annually, semiannually, quarterly and monthly. It depends on the agreement and most chose a monthly payment.
Classification of annuities cover the number of lives covered, time when payments commence, method of premium payment and nature of the insurer’s obligation.
There are five typical fees or charges that investors usually incur when purchasing annuities, particularly variable annuities. Understanding them (and their differences) will help make the best possible decision. These include: Investment management fees – These fees are typically anywhere from a 0.25 to 1 percent, but sometimes higher for specialized funds such as foreign […]
Almost all life insurance companies offer annuities, and these companies distribute annuities to customers through a variety of different options. The list below is a summary of these various options, followed by an explanation of variable annuities: life insurance agencies; many stock brokerage firms; independent insurance agents and financial planners; independent insurance brokerage firms; direct […]
When an annuitant dies before receiving the full amount guaranteed under a refund or period-certain life annuity, the owner or beneficiary receiving the balance of the guaranteed amount will have no taxable income (unless the amount received by the beneficiary plus the amount that had been received tax-free by the annuitant exceeds the investment in […]
Income earned by a variable annuity (see Questions and Answers below) is not taxed during the accumulation period. No tax will be payable until the earlier of: (a) the surrender of the contract; (b) a withdrawal from the contract; or (c) the time payments under the annuity begin (annuitization). To obtain annuity treatment, however, the […]
Annuitants’ investment in an annuity is returned in equal tax-free (return of capital) amounts during the payout phase. Any additional amount received is taxed at ordinary income rates. This means each payment consists of two parts: the first part is considered return of capital and is therefore nontaxable, while the second part of each payment […]
Premature distributions (those made before certain dates listed below) are subject not only to the normal tax on ordinary income but also to a penalty tax of 10 percent. The 10 percent penalty applies only to the amount of the distribution that is included in income. The penalty for premature distributions will not apply to […]