Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-11-2008, 11:44 PM
Junior Member
 
Join Date: Feb 2007
Posts: 6
Is purchasing an annuity in an IRA account a good investment strategy?

I have been trying to find some safe investments for my dwindling IRA. In doing so, I have been approached to purchase an Annuity in my IRA. My concern is whether this is allowed and is it a Good Strategy?

Any help in this matter I would be very appreciative!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-14-2008, 06:42 PM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
Is purchasing an annuity in an IRA account a good investment strategy

The answer to this question is very subjective, and it will differ amongst the various financial industry professional and the CPA. The CPA and the Financial Planner (who is only Fee-Based) may suggest that you do not indulge yourself with this method of investment in an IRA account. Whereas a Financial Professional who will be attempting to sell this product may feel that this product best suits you. Further he will argue its benefits that will offer a guaranteed stream of income at retirement and the relative safety versus the stock market.

The purpose of investing in an IRA account is take advantage of tax-free accumulation of gains from investment income. The tax-free accumulation is a powerful argument with assets in an IRA.

But, the nature of an Annuity is generally such that it is already provides for a Tax Free Accumulation of Earnings! Furthermore, the Annuity is a rather expensive product with very high surrender charges and management fees, and it is important to understand these expenses.

The commissions paid to Financial Professionals on the sale of this product are some of the highest amongst the financial products available in the market. Also, remember that once you purchase an Annuity, you are basically stuck with it for a minimum of 7 years, if you want to avoid paying surrender charges.

Most experts agree that the Annuity is a good product, but Not in an IRA! Furthermore, there are better products that you can invest in the market that will provide you with a steady stream of income without the encumbrances of the Annuity.

Outside of the IRA, the Annuity seems to be a reasonably good product but the Annuity market is in a constant flux,with new features and options available. To make a proper purchase you should understand all the cost associated with all the options and features, along with the Surrender Charges. Always, talk to your CPA to get his or her opinion as its suitability for your specific situation. A small tip, try and compare the Annuity rates amongst the various Insurance companies, you might be surprised to find a cheaper Annuity from another competing company.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What is the maximum amount a Taxpayer can deduct in 2007 for purchasing a new SUV? Adam Auto Expenses 1 12-07-2007 12:54 AM
Is it a good retirement strategy to have annuities in your retirement funds? Robbie Retirement Planning 1 08-22-2007 06:56 PM
Are Annuities a good investment? TaxGuru Investment Strategy 0 07-25-2007 02:57 AM
What are the tax benefits of an Annuity? Which are type should I buy at age 58? nilbos Retirement Planning 0 06-07-2007 12:21 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.