If you have money you’ve invested in an IRA to shield it from taxes you have a whole lot of investment options to choose from to try to grow your wealth. Mutual funds, stocks, bonds, exchange-traded funds, gold, and real estate are just some of the products available to you. Annuities are another option in your IRA, but they’re not always a good option.
The primary benefit of using an annuity (fixed, indexed, or variable) is to get tax-deferred growth, but if your money is already in an IRA you’re already getting that benefit! It’s redundant to use an annuity for deferring taxes in an IRA. Other reasons for using an annuity may include generating income with guarantees and death benefits. These options come in the form of riders and that means there are added expenses for you. Many annuities have such high fees and bad investment options that it’s really hard for the contract value to increase at all, leaving you stuck in the contract if you want to avoid big surrender fees.
Make sure you talk to an advisor that has other products available aside from annuities. If an advisor is recommending an annuity for your IRA, then there’s a good chance that that’s because that’s the only product they can offer. Annuities also usually pay much larger commissions to advisors than managed accounts do, so make sure your advisor is acting in your best interest and not his own!
I mean, just look at the disclosures required below to even write about annuities. It makes you think.
There is a surrender charge imposed generally during the first 5 to 7 years that you own the contract. Withdrawals prior to age 59 ½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. The guarantee of the annuity is backed by the financial strength of the underlying insurance company. Investment sub-account values will fluctuate with changes in market conditions.
Investors should consider the investment objectives, risks and charges and expenses of the variable annuity carefully before investing. An investment in a variable annuity involves investment risk, including possible loss of principal. Variable annuities are designed for long-term investing. The contract, when redeemed, may be worth more or less than the total amount invested. Variable annuities are subject to insurance-related charges including mortality and expense charges, administrative fees, and the expenses associated with the underlying sub-accounts. The prospectus contains this and other information about the variable annuity. Contact Jason Demland at 419-785-4525 to obtain a prospectus, which should be read carefully before investing or sending money.
Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. There is a surrender charge imposed generally during the first 5 to 7 years or during the rate guarantee period.
Index annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Any guarantees offered are backed by the financial strength of the insurance company, not an outside entity. Investors are cautioned to carefully review an index annuity for its features, costs, risks and how the variables are calculated.