What is an Annuity? Tax deferred annuities are contracts that are issued by insurance companies that offer a guaranteed rate of interest and guaranteed payout options. Interest earnings inside of annuities grow on a tax deferred basis. 

Annuities can offer very competitive returns that exceed CD's, money market and savings accounts.  Annuities can provide guaranteed income and no probate in case of death, as long as you specify beneficiaries. Annuities are generally no-load, no-fee products.  

Annuities Can Provide:

• Higher interest-rate alternatives to CD's or money market funds

• Long term savings growth without current taxation

• More savings for retirement, if you have maxed out qualified plans

• Options to roll over existing tax-deferred savings

• Guaranteed income for the rest of your and/or your spouse's life

What is a Fixed Term Annuity? A fixed or "CD Type"  annuity is one of the best options available for safe money vehicles.  A fixed annuity earns interest that is guaranteed by the insurance company for a specific period of time.   

What are Immediate Annuities?  Immediate Annuities provide for payments to you right away. For example a retiree who sells a home or business may use the sale proceeds to fund an Immediate Annuity to provide immediate regular income for a specified number of years or so long as they are living. 

What are Deferred Annuities?  Deferred Annuities specify that payments to you will begin at some date in the future, generally at retirement. Deferred Annuities are commonly used by people 1- 20 years from retirement that wish to provide for economic security during their retirement years. A deferred annuity can be structured to disperse earnings or can be rolled over into an immediate annuity for distribution.

How is Money Paid Out from Annuities?  Money is typically paid out for a set number of years (usually 5-20 years) or for the rest of your life. It may also be for the life of yourself and your spouse. 

What are the Tax Advantages of Annuities? Under current tax law, the money you invest in an annuity grows on a tax-deferred basis. Your annuity income is taxed as normal income when you begin receiving it. No income tax is paid on that portion of the income that represents the money you originally paid in to your annuity. Since most people receive annuity income after retirement and when they may be in a lower tax bracket, they generally pay less tax on annuity income than on income they earn while working full time. Any income you actually receive from an annuity is taxed as ordinary income rather than as capital gains. If you withdraw money prior to age 59½, you may be subject to an IRS tax penalty of 10% of the accrued earnings. 

Could I "cash in" my Annuity? You could terminate a deferred annuity contract early and receive your remaining interest payments and principle in one lump sum. If you were to cash in you deferred annuity early, you may be subject to a surrender fee and a market value adjustment, both of which vary over the life of the contract. This liquidity is not available with an immediate annuity. 

Can I rollover my IRA or 401k into an annuity and avoid paying taxes?  Annuities that receive an IRA or 401k transfer are considered a "qualified" plan. When you apply for an annuity with pre-tax money, the insurer creates an "IRA Annuity" account into which your money is transferred directly. You can directly transfer your qualified pension or IRA into an annuity without adverse tax consequences under a 1035 exchange. 

What is a 1035 Exchange?  The IRS Code 1035 allows you to exchange an existing insurance or annuity contract for a newer contract without having to pay taxes on the accumulation in your old contract. This way, you could get more flexible and tax-deferred accumulation without paying taxes on what you've already built up. 

How can Annuities Help During Retirement Years? You can begin receiving annuity income when you retire and continue receiving it for the rest of your life. Annuities can help protect against outliving your savings and refund options can pay out a specified amount to a beneficiary in the event of the insured's death. 

For more information on annuities or to speak with a licensed agent contact us to get started today!

Gain Financial Services, Inc.
3200 Cherry Creek South Drive
Suite 700
Denver, CO 80209

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Call us today at (303) 456-7967 or toll-free at (800) 416-4481