If you withdraw money from an annuity, there may be a surrender fee (or withdrawal charge).
#METROPOLITAN LIFE ANNUITY WRITEDOWN FREE#
Income tax free transfer means you can re-allocate money to suit changing investment goals (e.g., due to life events) without worrying about a current income tax burden on such a transfer because the tax burden is generally deferred until the taxable portion is distributed from the contract. In other words, if you transfer money to a different funding option within your variable annuity, you will not have to pay federal income taxes on any earnings you have accumulated at the time of transfer. Variable annuities also allow you to transfer money from one funding option to another without triggering a taxable event. A fixed account option can give you the security of allocating some of your purchase payment more conservatively while still taking advantage of market potential. Some variable annuities offer, in addition to a range of funding options, a fixed account option that guarantees both principal and interest, much like a fixed annuity. If they don’t perform well, you may lose not only any earnings you’ve made, but even some of your purchase payments. If the funding options you choose for your annuity perform well, they may exceed fixed annuity returns. Your purchase payments and earnings are not guaranteed they depend on the performance of the underlying investment options.
The account value of variable annuities can go up or down based on market fluctuations. These funding options may include portfolios comprised of stocks, bonds, and money market instruments. Variable annuities typically offer a range of funding options from which you may choose. A fixed annuity guarantee is subject to the financial strength and claims-paying ability of the insurance company that issues the annuity. Once the time period is over, a new guaranteed interest rate is set for the next period. Variable annuities, having the potential for gain and losses, have a higher risk.įixed annuities earn a guaranteed rate of interest for a specific time period, such as one, three, or five years. Fixed annuities are generally considered to be more conservative. You have the choice of buying a fixed annuity or a variable annuity. Therefore, there is no additional tax benefit to purchasing a deferred annuity to fund an IRA. Unlike a non-qualified deferred annuity purchased with after-tax dollars, an IRA or with a qualified plan receives tax deferral under the non-annuity provisions of the Internal Revenue Code. Withdrawals may be subject to withdrawal chargesġTax laws and regulations are subject to change. The calculation of the taxable portion of a distribution may differ depending on the type of contract (e.g., qualified or nonqualified) and whether you are taking withdrawals or receiving income payments. 1ĭistributions of taxable amounts are subject to ordinary income taxes and, if made before age 59½, may be subject to a 10% federal income tax penalty. Annuities can be a useful retirement vehicle.Īnnuities receive favorable tax treatment under which you generally don't pay on gains in the contract until you begin to withdraw money. You give the company money now and the company pays you periodic lifetime payments at a later time.
Annuities are financial contracts between you and an insurance company.
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