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Fixed Index Annuities

By: Allen Stewart

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FIAs are vital wealth management tools that present earning possibility while keeping principal safe from market fluctuation... In a Fixed Indexed Annuities (FIA) Your money will not be effected by market losses.

A Abundantly important wealth management tool!

Here's a summation of what benefits an annuities can give to your retirement portfolio...

* Ideal for Estate Planning... Proceeds from annuities pass immediately to your beneficiaries without the delay, expense, and publicity of probate in most states. If you've ever had a loved one's estate go through this time-consuming legal process, you know just what kind of help this is.

* The Capability of Tax Deferral... Since you do not pay taxes on gain every year, your annuity is able to work harder thanks to tax-deferral. You will have to pay taxes on gain when you withdraw your annuity's gains, but at least you can make your mind up when that happens.

* No Contribution Limits... Contributions to other retirement savings vehicles, like 401(k)s and Individual Retirement Accounts, are strictly restricted. Annuities, however, offer tremendous flexibility. You can contribute as much as you want, up to the restrictions imposed by the insurer, to take advantage of tax-deferral or variable accounts inside the annuity. Plus, you can add to your annuity agreement at any time.

* Flexible Payment Options... Unlike 401(k)s and IRAs, which requires that you begin making withdrawals at age 70 1/2, you may be able to wait much longer with annuities. When you do decide to begin receiving payments, you can ordinarily select one of the subsequent methods:

1. Lump Sum distribution (a one-time payment)

2. Periodic distributions (you can take money only when you need it)

3. Systematic distributions (a fixed or variable amount is sent to you at regular intervals)

4. Annuitization (fixed or variable payments, guaranteed for the rest your life)

* Tax Power...The money inside your annuity is made up of two gears -- principal and earnings. Assuming your annuity was opened with after-tax dollars, you're only taxed on your earnings.

Different distribution methods behave differently when it comes to taxes; for instance, Lump Sum, Periodic, and Systematic distributions exhaust all earnings (which are taxable) before tapping principal.

Under annuitization, each payment consists of both principal and interest, thinning out your tax liability evenly among payments. Through these distribution options, you have complete power over when you will pay taxes on your earnings.

Annuities are not ideal when it comes to tax control. If you should pass away while your annuity is accumulating, all deferred taxes on your growth will become due, reducing your annuity's value.

* Simple To Start and Maintain... Usually, a simple application, a check, and your signature begins your annuity. And, at the end of each year, you will not receive a 1099 for income earned within your annuity contract. That's one less thing to worry about when April 15th rolls around.

* Other Features... Annuities also do not offset Social Security benefits like bond, CD, and other investment income does

Annuities are painless to start and often come with a "free look period." Your state of residence or the annuity agreement will define a length of time (usually 30 days) where can cancel your contract if you decide it's not right for you.

You can even exchange older, non-performing annuities into a newer fixed annuity with no tax consequences, thanks to Section 1035 of the Internal Revenue Code.

Article Source: http://depositarticles.com/

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