3 Things Teachers Probably Didn’t Know About Annuities
Annuities are excellent tools for teacher retirement planning, but they can be confusing, too! And the complicated part is understanding the different options, even when the underlying concept is pretty simple.
When it comes to your teacher retirement, annuities are an important piece of the savings pie. As a teacher, how well do you understand annuities?
We bet your answer is not much, so here are three things you didn’t know about annuities:
1. Your Annuity’s Growth Is Not Taxed, But Withdrawals And Income Payments Will Be
Interest accumulates tax-free on annuities and is not taxed until it’s withdrawn. With deferred annuities, you can divide when to withdraw interest, and then pay taxes on it.
Annuity withdrawals are taxed on a Last In, First Out Basis, meaning that accumulated interest earnings are considered to be withdrawn first, before you get any of your tax-free principal back. Depending on how much untaxed gain there is in the annuity, this could be a disadvantage for partial withdrawals which all count as taxable income.
2. Anyone Other Than Your Spouse As Your Primary Beneficiary Could Be a Mistake
Once you name your spouse as your primary beneficiary, your spouse will be able to access your annuity without paying taxes. Upon your death, they have the option to take the distribution or assume full ownership of the annuity.
Non-spousal beneficiaries do not have the option of assuming ownership of annuities, and once it is distributed to them, non-spouses must pay income on the annuities and the increase in value.
3. Many Annuities Can Work Well Within an IRA
It might sound funky to use a tax-deferred product within a tax-deferred savings account, but it works well. Annuities income, guaranteed interest rates, and protection still offer many advantages within an IRA account.
Purchase an Annuity Today – Get a FREE Quote from National Educational Services
Annuities provide a fixed income stream for a person’s lifetime or a specific period of time. An annuity can be purchased as a lump sum, or a series of payments and can be paid out almost immediately.
If you want to add annuities to your retirement plan, speak with a retirement expert from National Educational Services. Annuities are an excellent way to fund retirement, and we can help you get started. Fill out the form below, and we will be in touch with you soon.