A Few Benefits of an Annuity
For Mark Roberts’ Use: As you plan for retirement, you may be presented with several different investment options. It can be hard to know which savings vehicles to pursue, but one very important factor you should always consider is the tax benefits of all options.
At some point you may consider purchasing an annuity. In this case, the tax benefits will differ, depending upon whether you choose a qualified or non-qualified annuity.
A qualified annuity (such as those within an employer-sponsored retirement plan or an IRA) are usually purchased with pre-tax money. When you begin to take withdrawals after retirement, this money will be taxed as part of regular annual income. Remember that purchasing an annuity within an employer-sponsored retirement plan or IRA will provide you with no additional tax benefits beyond what you already reap through the retirement fund itself.
Annuities purchased with after-tax money (outside of your employer-sponsored retirement plan or IRA) are known as non-qualified annuities. These annuities are taxable once you begin taking withdrawals, but only the earnings on the annuity are taxed. If you purchased your annuity after August 13, 1982, earnings are taxed on a “Last In, First Out” (LIFO) basis. In other words, as you take withdrawals, the accrued interest is the first money taken out and taxed as ordinary income. Once the interest has been paid out, the initial investment is distributed without further taxation.
If you do decide to purchase an annuity, keep in mind that surrender charges usually apply if you surrender the policy its early years. If you surrender it before you reach age 59 ½, the money could be subject to a 10 percent federal income tax penalty. Talk to your financial advisor to determine whether an annuity would fit well into your overall retirement plan.
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In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution.
Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies.
Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.”
Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.