In a blog from last month, we discussed what an annuity is and various types of annuities. In general, an annuity is a contract with an insurance company where you pay a lump sum or monthly payment, and receive regular disbursement in the future.
There are several types of annuities you can choose from: fixed, variable, indexed, immediate, etc. Each annuity type has its own list of benefits and drawbacks, but we will be discussing in broad terms. If an annuity is something you are interested in, then contact Texas Insurance Agency today. We would be happy to find an annuity you are comfortable with.
Annuities may be used for a source of income during retirement. If you hope to retire one day, then an annuity may be a good option. Annuities are capable of providing lifelong income, which is a great way to stay retired. In addition to a constant source of income, you do not have to pay any taxes on your annuity until you withdraw funds. When CDs mature, the United States government collects its portion of the account.
This may not be an obvious benefit, but it allows you to choose when to pay your taxes. Leaving your annuity funds will also reduce your amount of Social Security taxes because you have less taxable income. Finally, the last benefit of annuities is their guaranteed rates. Depending on the type of annuity you choose, you will know your rate of return at a certain time. Variable annuities payout varies on the market’s performance.
One disadvantage you may be experienced when looking into an annuity is their complexity. This system is not easy to understand, and the insurance industry has allowed for a variety of annuity-like programs to appear. Texas Insurance Agency can help you make the right decision without all of the confusion.
Another drawback of an annuity is their lofty fees. Compared to mutual funds and CDs, annuities have much higher rates, and some are equipped with upfront fees. Be sure to weigh your options when determining which retirement plan is best for you.
Finally, the last major drawback of annuities is their higher tax rate. Taxes are not taken out of your annuity until you withdraw funds, but those taxes are higher. Younger individuals may find better options with a 401(k) plan.
Let Us Help You Consider an Annuity
Texas Insurance Agency works with several insurance companies, so our clients can get the best annuity options available. Contact our team today by calling (281) 398-1010. Our agents will work with you closely to find the best retirement plan for your life.