What You Need to Know About Annuities in an IRA

Annuity IRA: What you should know

Highlights

  • What is an annuity?
  • You can have an annuity inside of an IRA

What is an Annuity?

An IRA annuity is an investment product that allows you to invest your IRA funds in an annuity. An annuity is a financial product that can provide you with an income stream during retirement. An IRA annuity can be a good option for those who want a guaranteed income during retirement.

An annuity is a contract between you or your IRA and an insurance company. The insurance company agrees to make payments to you or your IRA for a set period or the rest of your life. In return, you agree to make regular payments to the insurance company. Many different IRA annuities are available, so choosing the right one for your needs is essential.

Two popular annuity types include fixed annuities and variable annuities. Fixed annuities provide you with a fixed rate of return, while variable annuities offer you the potential to earn a higher return with more risk. Choosing the right annuity for you should be made with the help of a financial advisor or one who knows your needs and financial situation and can steer you into the right product for you.

An Annuity In Your IRA

When investing in an IRA annuity, you must choose an insurance company that offers IRA annuities or works with a self-directed IRA custodian. Because of this, it is vital to shop around and compare options before choosing an insurance company and custodian.

Once you have chosen an IRA annuity, you must fund it. You can do this by making a lump sum investment or making regular contributions. Making these contributions through the IRA is imperative to guarantee the tax advantages IRA accounts provide. If you choose a traditional or Roth IRA, you will be taxed on the contributions (Roth) to the IRA or the distributions (Traditional) from the IRA.

You can make withdrawals starting at age 59 1/2. If you withdraw money before age 59 1/2, you may be subject to a 10% early withdrawal penalty.

IRA annuities can be a good option for those who want a guaranteed income during retirement. However, it is crucial to understand the features and risks of IRA annuities before investing in one.

We are always happy to help you understand your IRA and investment options. Need investment advice about annuities within an IRA? Let’s talk more.