Annuities can be a great way to put money away into an IRA for retirement, but there are many different types of annuities. This guide will provide the different types of qualified IRA annuities to that an owner can contribute money to.
Types of Annuities That Allow Contributions To An IRA
- Fixed annuities guarantee your money will earn at least a minimum interest rate. Fixed annuities may earn interest at a rate higher than the minimum, but only the minimum rate is guaranteed. The insurance company sets the rates.
- Fixed-indexed annuities are a type of fixed annuity that earns interest based on changes in a market index, which measures how the market or part of the market performs. The interest rate is guaranteed to never be less than zero, even if the market goes down.
- Variable annuities earn investment returns based on the performance of the investment portfolios, known as “subaccounts,” where you choose to put your money. The return earned in a variable annuity isn’t guaranteed. The value of the subaccounts you choose could go up or down. If they go up, you could make money. But, if the value of these subaccounts goes down, you could lose money. Also, income payments to you could be less than you expected.
- Deferred Income Annuity (DIA) is an income annuity similar to a pension plan in which a consumer exchanges a lump sum of money upfront today for a deferred, irrevocable retirement income stream (over a fixed period of time or lifetime) in the future.
What Is A Qualified Annuity?
A qualified annuity has been purchased to contribute to a tax-qualified plan. Pension and profit-sharing plans, simplified employee pensions (SEPs), SIMPLE IRAs, tax-sheltered annuities (TSAs), and IRAs are all examples of such plans.
Contributions to a qualified annuity are taken from your earnings and placed in the retirement plan to accumulate. They are not taxed until you take them out of the account in retirement. Contributions to a non-qualified program are made with money already taxed.
Compare Annuities That Allows IRA Contributions
| Variable Annuity | Fixed Index Annuity | Fixed Annuity | Deferred Income Annuity | |
|---|---|---|---|---|
| Principal Protection | No | Yes | Yes | Yes |
| Access To Principal | Yes | Yes | Yes | No |
| Control Over Money | Yes | Yes | Yes | No |
| Tax-Deferred Growth | Yes | Yes | Yes | No |
| Guaranteed Growth | No | Yes | Yes | No |
| Guaranteed Income | Yes | Yes | Yes | Yes |
| Inflation Protection | Yes | Yes | No | Yes |
| Death Benefit | Yes | Yes | Yes | Yes/No |
| Long-Term Care Help | Yes | Yes | Yes | No |
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