How to Make the Most of a Maturing Equity Indexed Annuity
Did you invest in an equity indexed annuity a few years back? If you bought it seven years ago, the maturity date may be approaching fast, and you might only have a small window of time to decide whether to renew the annuity or place your money elsewhere. If you look at what has happened to annuity rates and the markets since you bought your equity indexed annuity, you may understand why the specifications for a new contract might differ. Interest rates are at a four-decade low, and the markets have swung wildly. Therefore, there’s a good chance that you will see lower market participation rates and lower maximums (caps) on amounts credited to your equity indexed annuity. In addition, you may have to make a longer-term commitment on your new contract. The company might now have the ability to change participation and cap rates on the annual anniversary dates, whereas, your original contract may have kept the same numbers throughout the term. However, this could work in your favor. Because if the equity markets become less volatile, there’s the chance that index option premiums will decrease, thus allowing annuity companies to offer higher annual participation levels and caps. Times have [...]
Categories: 1035 exchange, equity indexed annuity Tags: equity indexed annuity, surrender charge
Will a 1035 Exchange to Get a Better Retirement Annuity?
You can exchange one retirement annuity for another, but you as a retiree need to watch out for what you may lose in the process. Often when you have one investment and see a similar but better version of it, you wonder if you can ‘upgrade’ to the new and improved version. Generally, whenever you liquidate an investment or retirement annuity, you need to pay taxes on any gain. If you buy another investment, your cost of the new investment will be its tax basis until it is sold in the future to determine gain. However, in the case of two retirement annuities of ‘like kind’, the U.S. tax code, section 1035, allows you to simply exchange the two ‘like kind’ contrcats–if circumstances allow–so as not to have to pay tax until the latter investment is sold or pays out. In the case of retirement annuities, you need to be aware of what/how your ‘new and improved’ annuity may be different from your ‘old’ annuity. Section 1035 allows you to exchange an existing annuity contract for a new annuity contract without paying any tax on the income and investment gains in your current retirement annuity. These tax-free exchanges, known as [...]
Categories: 1035 exchange, retirement income Tags: 1035 exchange
