Annuity Services

Annuity and Insurance Services to Sarasota

Annuity Services

An annuity is a contract issued by an insurance company. It is a unique financial product that provides tax deferral of interest. Although annuities can serve various needs, the main reason to buy an annuity contract is to obtain an income, usually for retirement purposes. Annuity contracts may be either immediate or deferred. Immediate annuity contracts provide income payments that start shortly after you pay the premium. Deferred annuity contracts provide income payments that start later, often many years later.

Annuity contracts may be either single premium or flexible premium. Single premium annuity contracts are established with a one time lump sum payment.  Flexible annuity contracts are designed to allow for multiple payments throughout the contract term of the annuity. Most annuities are considered flexible premium contracts.

The Accumulation Phase

  • During the accumulation phase, the annuity grows tax deferred.
  • If you withdraw money from your annuity before age 59 ½ it is called a “premature distribution” and is subject to an additional 10% IRS penalty.
  • If a premature death should occur, the accumulated funds within the annuity are transferred to the named beneficiary, avoiding probate costs.
  • Annuities can vary by payment mode and are available as single or flexible premium.

Withdrawal

  • Withdrawals may be made at any time. However, the withdrawal may be subject to surrender charges and if done before age 59 ½ there will be a 10% IRS penalty. Some contracts allow an annual 10% withdrawal free of surrender charges.
  • The owner may pre-authorize a systematic periodic withdrawal plan. The owner of the contract instructs the company to withdraw a percentage or a level dollar amount from the contract on a monthly, quarterly, semiannual, or annual basis. This option may not be available on all annuities.
Under current law, annuities grow tax deferred. An annuity is not required for tax deferral in qualified plans. Annuities may be subject to taxation during the income or withdrawal phase.