What You Need To Know About Annuity Taxes Before It’s Too Late

Sad to say, we spend a lot of time trying to get clients out of annuities they’ve purchased elsewhere. Annuities can be extremely costly, and once you’re in, you may not be able to get out for seven or more years without a major hit to your wallet.

The sales pitch is always compelling, but you won’t hear about the problems with annuities until it’s way too late. When we show clients what their annuity is really costing them, they’re shocked.

If you own an annuity or have considered investing in one, take a look at this article by financial reporter Jeanne Sahadi of CNNMoney. Jeanne did a great job illuminating the often convoluted tax rules affecting annuities, and we were happy to talk with her about what every annuity investor should know before buying.

Make sure you understand how withdrawals and investment returns are taxed before handing over your money, as annuities are unlike other investments in their tax treatment.

The Takeaway: Although we are not usually big fans of annuities, there are a couple annuity options that we do like, and a few unique situations that would lead us to recommend annuities for clients. Make sure to get a second opinion before you do consider an annuity, otherwise the only person benefiting from the purchase might be the salesman who makes a big, fat commission as soon as you buy!

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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