What is an annuity?
An annuity is a financial product that provides a steady stream of income over a specified period of time, typically during retirement. It is designed to help individuals build and secure their financial future. Annuities serve the purpose of offering a predictable income source, ensuring a regular flow of funds to cover living expenses and maintain a desired standard of living during retirement.
They can be purchased through a lump sum payment or regular contributions, and the accumulated funds grow on a tax-deferred basis until withdrawn. Annuities can provide peace of mind by offering financial stability, mitigating the risk of outliving one's savings, and serving as a reliable source of income in retirement.
Germania Life offers several annuity options to help you find the financial security you need.
Non-Qualified Annuity
A flexible and tax-advantaged solution for your financial future.
With tax-deferred growth, non-qualified annuities accumulate monetary growth while not incurring tax penalties until the funds are withdrawn. There are no contribution limits, giving you the freedom to invest according to your financial goals. Non-qualified annuities provide a reliable retirement income stream and can be part of your estate planning. Unlike qualified retirement plans, no mandatory withdrawals are required, allowing your investment to continue growing. Non-qualified annuities can also offer peace of mind by allowing the funds from your policy to be used as a death benefit payable your beneficiaries. Secure your financial well-being with a non-qualified annuity.
Non-Qualified Annuity Features:
- Tax Deferred Growth: Non-qualified annuities offer tax-deferred growth, whereas the owner will not pay taxes on the gains until the money is withdrawn.
- No Contribution Limits: There are no contribution limitations for non-qualified annuities. Investments into the account can be any amount, making it a flexible option.
- Income Stream: By setting up reoccurring withdraws, you can provide yourself a steady income stream with a non-qualified annuity. Depending on the amount and frequency of withdraws, the funds could span out of many years to supplement your retirement plan.
- Estate Planning: As part of an individual’s estate planning strategy, often times financial advisors will recommend a non-qualified annuity product to bridge gaps that may exist with retirement plans alone.
- No Required Minimum Distributions (RMD): Unlike qualified retirement plans, non-qualified annuities do not have a mandatory RMD. This means, the individual will not be forced to withdraw a specific amount annually once you reach a certain age. This flexibility allows the owner to continue to grow their investment if the funds are not needed immediately.
- Death Benefit: It is possible for non-qualified policyholders to retain the account for the purpose of providing a death benefit to their beneficiaries upon their death. If this situation occurs, typically, the account will be set up to pay a guaranteed amount at death and the possibility of future payments to the beneficiary over a number of years.
Traditional IRA
Traditional IRAs offer valuable tax advantages, allowing individuals to deduct contributions from their taxable income each year. Enjoy tax-deferred growth, meaning your investments can grow without being subject to capital gains or dividend taxes.
With contribution flexibility, you can save annually within IRS limits, tailoring your contributions to your financial situation. Traditional IRAs also provide penalty-free withdrawals for specific circumstances such as education expenses, buying a first home, or certain medical expenses.
Manage your tax liability during retirement with potential tax savings, as you can strategically withdraw from your traditional IRA under the guidance of a financial advisor to control taxable income and leverage lower tax brackets or deductions. Traditional IRAs are a valuable addition to your retirement savings plan, complementing other options like 401(k) contributions, ensuring a secure future.
Traditional IRA Features:
- Tax Advantages: IRAs offer tax advantages that can assist individuals in saving for retirement. Traditional IRAs allow for tax-deductible contributions, meaning one can deduct contributions from taxable income each year.
- Tax Deferred Growth: IRAs provide tax-deferred growth, allowing the investment to grow without being subject to capital gains taxes or dividend taxes.
- Contribution Flexibility: Individuals who are seeking flexibility in contributions often seek out IRAs because of the allowance to contribute annually to their account, however, the amount is limited by IRS regulations.
- Penalty-Free Withdraws: Traditional IRAs offer penalty-free withdrawals before reaching retirement age in some circumstances. The circumstances that would constitute a penalty-free withdraw would include withdraws for higher education expenses, for purchasing a first home or for certain medical expenses.
- Potential Tax Savings: IRAs can help individuals manage tax liability during retirement years. Under the advice of a financial advisor, some individuals take advantage of withdrawing from their traditional IRA, so they can potentially control taxable income and take advantage of lower tax brackets or deductions which reduce the overall tax burden.
- Retirement Savings: Traditional IRAs are excellent tools for supplementing other retirement savings plans. When contributions limits are met on 401k plans, individuals can take advantage of IRAs as a way to contribute funds for future retirement needs.
Simplified Employee Pension (SEP) IRA
SEP IRA is a simplified retirement plan that offers employers and employees a flexible and tax-advantaged solution. Employers can make tax-deductible contributions to their employees' SEP IRAs based on a percentage of their compensation. The plan allows for efficient setup and administration, with higher contribution limits than traditional IRAs. Employees benefit from tax deductions on contributions and tax-deferred growth within the SEP IRA. The SEP IRA provides employers with flexibility in contributions and offers employees a retirement savings vehicle with potential long-term financial benefits. Start planning for a secure retirement with SEP IRA today.
(SEP) IRA Product Features:
- Tax Deductible Contributions: SEP IRAs allow for tax-deductible contributions which are made by an employer. The employer contributes up to a certain percentage of each eligible employee’s compensation (up to the annual contribution limit) to their SEP IRA.
- Employer Flexibility: SEPs allow employers to be flexible with contributions based on the company’s performance. This allows the plan to be tailored to contributions that align with profitability for the business.
- Tax-Deferred Growth: Similar to traditional IRAs, SEP IRAs offer tax-deferred growth. All contributions made to a SEP can grow tax-free until withdrawal.
- Efficient Setup and Administration: For employers who are not familiar with financial markets, but want to provide a benefit to their employees, a SEP IRA is typically a good fit. Setting up a SEP requires less paperwork than traditional plans and allows for less administrative tasks to sustain the account. Small business owners find this a helpful tool to add to their employee packages.
- Higher Contribution Limits: When compared to a traditional IRA, often times SEP IRAs allow for a greater amount of contribution limit, allowing the employer to invest more for their employee if they so choose. As of 2021, the maximum contribution limit was set at 25% of an employee’s compensation or a max of $58,000. The higher the limit set by the IRS allows the employee to retain more for retirement purposes.
- No Required Contributions: There is no obligation for the employer to contribute to an employee’s SEP year to year. During a period of financial stress, the employer may elect not to contribute to employee’s SEP accounts. This option provides financial security for the employer.
- Tax Benefits to Employees: Contributions made to SEP IRAs are tax-deductible, helping reduce taxable income for employees. Additionally, the earnings within the SEP IRA grow tax-deferred until withdraw.
To learn more about Annuities by Germania Life, contact our knowledgeable agents at 1-800-392-2202 ext. 2060 or glife@germaniainsurance.com.