IRA / Annuity Planning

IRA / Annuity Planning

Annuity Basics

Annuities are designed to give customers a long-term growth and qualify as a retirement planning vehicle. They offer many benefits including tax deferral and retirement income.


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Features and Benefits of an Annuity:

  • Tax deferral
  • Retirement income through systematic payouts, including lifetime guaranteed income options from annuitization
  • Variety of payout options
  • Penalty-free withdrawals
  • The potential to avoid probate at death

Fixed annuities include both traditional fixed annuities and index annuities. Because index annuities include similar guarantees as a traditional fixed annuity, they are not considered a variable product. The main difference between a traditional fixed annuity and an index annuity is that an index annuity’s interest earnings are based on the performance of an external index, subject to Caps, Margins or Participation Rates, and the index accounts do not include a declared interest rate.

Why consider an Equity Indexed Annuity?

The Equity Indexed Annuity becomes your Individual Retirement Account (IRA). That means it is under your control and is no longer managed by your previous employer. This can be a big comfort before and during retirement. Many people today use Annuities as part of their overall financial plan instead of savings accounts and certificates of deposit because their tax-deferred money can grow and compound faster over a shorter period of time.

An index annuity may be suitable for you if you:

  • Are looking for tax-deferred growth in their investment.
  • Want a minimum interest rate guarantee but also like the idea of potentially being able to benefit from rising markets.

With an index annuity, you receive a guaranteed minimum interest rate, but could potentially receive a higher crediting rate based on the performance of one of a variety of market indices. There are many types of index annuities and our representatives can show you more specifically how an index annuity may be suitable for you.

While your money is in the annuity, your earnings grow tax-deferred; which means you will not pay income taxes on that growth until it’s withdrawn from the annuity. Best of all, because you’re not paying current income taxes on those earnings…your annuity can grow faster because the money that may have had to be withdrawn from the annuity to pay income taxes can stay in the annuity and continue to grow.

What is an Equity Indexed Annuity?

An Equity Indexed Annuity is also a fixed annuity but the interest earned is linked to an external equity or bond index. The most commonly used indices are the S&P 500, the DOW Jones Industrial Average, and the NASDAQ 100. The values of an index can vary daily. When purchasing an equity-indexed annuity, you own an Annuity Contract backed by a Financial Company. You are not purchasing shares of stock or indexes.

Equity Indexed Annuities (IRA) feature these advantages:

  • Maximize Upside Potential: They allow you to take advantage of market gains with interest rates that can be linked to funds such as the DOW, the Nasdaq, the S&P 500 and several different bond funds.
  • Safety – No Downside Risk: Your principal and interest earned are protected from stock market loss, which means you cannot lose your initial investment or earned interest. You are also guaranteed a minimum Rate of Return.
  • Uniquely Flexible:You control how your annuity grows by choosing the index linked calculation method each year on your contract’s anniversary.
  • Tax-Deferred: This means the taxes you pay on your investment are postponed until you make a withdrawal.
  • Guaranteed Lifetime Income: This is an option available that guarantees you can never outlive your money.
  • Lump Sum Withdrawals:Many allow for a penalty free annual withdrawal after the first year (after age 59 1/2).

What is your time frame?

It’s important to remember that an annuity is for long term retirement investing. If you need money from your annuity in the early years of your contract, there may be a surrender charge (see the terms of your specific annuity contract) in addition to a 10% penalty tax if you take withdrawals before the age of 59 ½ (There are exceptions to this rule that your financial professional can tell you about.)

How and when would you like to begin withdrawing income from your annuity?

There are many income and withdrawal options with annuities. When you are ready to start receiving income from your annuity, some of your options may be:

  • Take random “lump sum” withdrawals (subject to the terms of your annuity contract)
  • Set up systematic withdrawals. You tell the annuity company how much income you want and how often, when to start the withdrawals and when to stop.
  • Annuitize the contract and choose an income option. If you die before you annuitize your contract, your annuity will pass to your beneficiari(es) without the cost and delay of probate. If you’ve already annuitized your contract, the income option you chose when you annuitized will determine how much money goes to your beneficiari(es).

Union Retirement Solutions can make your rollover simple, quick and hassle free.

We will answer your rollover questions in clear, understandable terms and create a financial plan unique to you and your family. We will outline the steps we’ll need to take together to get your rollover accomplished. We can work directly with your pension administrator to handle all paperwork and even notarize the forms necessary.

Equity Indexed Annuity Rules

  • All withdrawals are subject to tax.
  • Withdrawals prior to age 59 1/2 may be subject to IRS penalties.
  • Mandatory withdrawals must start at 70 1/2 according to the Internal Revenue Code.
  • To avoid 20% Federal withholding, your account must be directly rolled over from your Administrator to the new plan, without you as the go between. Ask your Representative or tax advisor for more information.

Annuities may be a good choice for a portion of your retirement savings. Annuities can help you reach your retirement income goals with the choice and flexibility they can offer. Learn more about annuity choices offered through Union Retirement Solutions by speaking with one of our representatives. We can help you determine what type of annuity may be suitable for a portion of your retirement savings.

Direct Rollovers

What is a direct rollover?

A direct rollover is the tax-free movement of retirement plan assets directly into the IRA of the person receiving the payout. DIRECT means that your retirement plan assets would be paid to a select investment for the benefit of your IRA.

Are direct rollovers always tax-free?

YES. A properly conducted direct rollover is always a tax-free transaction. Choosing a direct rollover is often the only way to avoid mandatory federal and state income tax withholding on your retirement plan payout.

Why should I choose a direct rollover?

There are many benefits to conducting a direct rollover. As a direct rollover keeps your retirement asset tax-deferred. Probably the most significant benefit to conducting a direct rollover is that you hold the contract and control the asset personally, not a third party administrator.

What happens if I die before withdrawing my retirement plan dollars?

If you die before withdrawing your retirement plan dollars and your spouse is beneficiary, he or she may be able to roll the amount into his or her own IRA.
Direct Rollovers are a smart choice. We can assist you and your administrator in completing the proper direct rollover forms allowing you to retain control of your retirement dollars.


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Nearing Retirement?

Can you afford to retire?

Analyzing your future sources of retirement income can show whether you’ll have the financial resources to meet your expenses when you retire. Your income sources may be Social Security, Savings, Investments and your Pension.


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How much will your retirement cost?

Projecting your retirement expenses now will give you an idea of the costs you’ll be facing as a retiree.

What does retirement mean to you?

Defining your retirement goals before you retire can assist in figuring out if you can afford the retirement lifestyle you desire.

What if you don’t think your financial resources are sufficient?

Identifying potential gaps between your retirement income and expenses before you retire may allow you to address shortfalls and take necessary steps, like paying down debt and increasing savings.

What should you do with savings and investment plans at retirement?

Always review and understand your distribution options. Reviewing your investment strategy before retirement can ensure that your investments remain on track to meet your income and growth needs during retirement.

Are there other things you do to plan for a secure retirement?

Yes, taking additional steps like reviewing health care and insurance needs or developing an estate plan will always bring added security to your golden years.

We look forward to providing you with more detailed information on some of the issues to consider when retiring.

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