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Annuities
Why Consider Variable Annuities?
By Chris McClure
Financial Planner, Lincoln Financial Advisors Corp
You may already participate in an employer-sponsored retirement plan and/or contribute to an Individual Retirement Account (IRA). If so, congratulations! You're one step ahead of many Americans when it comes to saving your money. But chances are you will still need additional retirement savings to secure your financial future and reach your retirement goals.
Here are some reasons to consider investing in a variable annuity:
Need to get started.
A variable annuity may help towards retirement savings and shift some of your tax burden to your retirement years, when you may be in a lower tax bracket. Be sure to consider your short-term savings needs before committing to this long-term investment.
Need to catch up.
Home purchases, college tuition and other expenses can all hinder our ability to save for retirement. The unlimited contributions, tax-deferred compounding and long-term investment strategy of a variable annuity can help you start moving toward your retirement goals.
Need to contribute.
Contribution restrictions in IRAs and employer-sponsored plans limit the amount of money you can invest. Self-employed individuals and small business owners don't always have access to employer-sponsored retirement plans. For these individuals, variable annuities can be particularly helpful.
Need to manage savings.
If you are close to or already in retirement, a variable annuity can help you control taxes and manage your retirement income. With a variable annuity, you can choose to receive a guaranteed income for life. And, unlike traditional IRAs and employer-sponsored plans, you do not have to begin taking income from your variable annuities at age 70½.
Why Consider a Variable Annuity?
Variable annuities offer both long-term, tax-deferred growth potential and flexible payout options in retirement. They also offer unique benefits that make them an appealing investment alternative on their own.
Of all the retirement options available to you, only variable annuities give you: tax-deferred growth potential; investment flexibility; guaranteed retirement income; and, insurance protection for your heirs. However, taxes are due upon distribution at ordinary income tax rates. Withdrawals taken prior to age 59 1/2 may be subject to an additional 10% IRS penalty tax.
This article is designed to help you understand the value of variable annuities and to show you the ways in which a variable annuity can be an integral part of your tax management strategy and retirement savings plan.
How Will You Live When You Retire?
America's pending retirement savings crisis has drawn a lot of media attention lately, and for good reason. As millions of baby boomers approach retirement age, more demands are being made on our Social Security system. Chances are, you'll be expected to rely heavily on personal savings and investments to fund your own retirement.
What's more, over time the effects of inflation may significantly erode the value of your hard-earned retirement savings. In fact, even a low inflation rate of just 3% will cut the value of your nest egg in half in just 25 years.
A Variable Annuity Can Help You Save
A tax-deferred variable annuity can help you reduce your current taxes and fight inflation as you save for your retirement. It's a strategy that more and more investors are using as Americans' fear of outliving their savings grows.
Variable annuities are offered by prospectus. An investor should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and the underlying fund options before investing. To obtain a prospectus that contains this and other information call your investment professional for a free prospectus. Read the prospectus and underlying fund prospectus carefully before you invest or send money. The investment return and principal value of an investment will fluctuate with changes in market conditions so that an investor’s shares when redeemed may be worth more or less than the original amount invested. Variable annuities can offer tax deferral, lifetime income and death benefits. Variable annuities have riders that may be available at an additional cost. Guarantees are based on the claims paying ability of the issuer. Withdrawals may be subject to a withdrawal penalty, are subject to ordinary income tax, and if taken before age 59 1/2; a 10% penalty may also apply.
Chris McClure is a registered representative and investment advisor representative of Lincoln Financial Advisors Corp.
This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances.
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