Annuities can be used very effectively to supplement your employer-provided retirement plan. There are a variety of retirement planning options that can meet your future financial goals. Employers may fund some options and there are opportunities for individuals to establish funding. In most cases, withdrawals before age 59 1/2 are subject to a 10 percent penalty, and withdrawals usually must begin by April 1 of the year after you turn age 70 1/2. Income taxes are also due upon withdrawal in most cases.  Annuity contracts are not qualified retirement plans; however, they provide tax-deferred growth similar to qualified retirement plans. Annuity contracts are also subject to withdrawal conditions very similar to qualified retirement plans however there are no contribution limits.


Making the Right Choice

The type of annuity contract you choose depends on what function you’d like it to fill in your savings and investment portfolios.  Every retirement investor has different goals, risk tolerances. Both fixed and variable annuities offer tax-deferred growth and a death benefit. But where a fixed annuity offers a fixed rate of return, a variable annuity offers some flexibility.

If you need an addition to your portfolio that offers stable, tax-deferred growth with high security, a fixed annuity could be just what you’re looking for. On the other hand, if you’re looking for a tax-deferred investment that will let you take a more active role, a variable annuity could be right for you. Whichever you choose, an annuity contract can be an attractive addition to your investment and savings portfolio. Withdrawals made from an annuity prior to age 59 1/2 may be subject to a 10 percent.

Generally, surrender charges apply if withdrawals are made in the early years of the policy. An annuity's benefits are contingent upon the claims-paying ability of the issuing insurance company. Variable annuity subaccounts fluctuate with changes in market conditions and, when surrendered, your principal may be worth more or less than the original amount invested.