Fixed, variable, and indexed annuities all offer the opportunity to convert, or “annuitize”, and generate a stream of income for a set time period, or even for the remainder of your lifetime.
When you initially purchase an annuity, funds may be contributed in a number of ways, depending on whether the annuity is immediate or deferred. For instance, with an immediate annuity, a single lump sum contribution is usually made. Income will then begin paying out right away (or at some point within the next 12 months).
With a deferred annuity, you can make just one contribution, or instead you can make numerous contributions over a period of time. You can then annuitize and start receiving income at a time in the future.
If you’re still wondering “What is annuity income, and what are my options?”… read on!
The taxation of income from an annuity will be dependent on what type of annuity you have – in this case, qualified or non-qualified. With a qualified annuity, your contributions have typically not been taxed. For instance, your deposit(s) may have come from a traditional IRA or 401(k) plan where money was swept into the account pre-tax.
Because the gain in an annuity is also allowed to grow without annual taxation, Uncle Sam will eventually want his money. So, in the case of a qualified annuity, 100% of your withdrawals or income payment will be taxable.
With a non-qualified annuity, though, your contributions are usually made with after-tax money. Since non-qualified annuities also allow for tax-deferred growth, a portion of your income or withdrawals from this type of annuity will be taxable, and another portion (i.e. the part that is considered a return of your premium) will be tax-free.
One of the biggest reasons people purchase annuities is for the income they can provide. Knowing approximately how much income an annuity will provide can be a key component of your overall retirement planning. That way, it can more easily be coordinated with other income sources such as Social Security and/or an employer pension.
There are many annuity income calculators available online that can help you with figuring out what you can expect. These can give you a much better idea of how much your annuity payment will be, as well as how long you could receive this stream of income.
Unfortunately, many of the annuity income calculators that you may find online can be a bit cumbersome to use or may not have up-to-date annuity rates and guarantees. If you’re looking for personalized annuity guidance, feel free to send us your questions about annuities using our secure contact form here on this page — and we’ll do our best to point you in the right direction.
With people living longer life spans today, one of the biggest concerns on the minds of retirees is running out of money while they still need it. Yet, even given a volatile stock market and a historically low interest rate environment, an annuity can still provide you with an income stream you can count on for life.
In addition, depending on the type of annuity you purchase, there are a number of other benefits you can take advantage of, too, such as tax-deferred growth and penalty-free withdrawals in certain situations.
So, if you’ve been asking yourself, “What is annuity income?” or “Should I buy an annuity?” it is important that you first determine what your primary goals are. From there, you can narrow down the right annuity option for you.
Doing so can be much easier when you work with an annuity specialist who has access to information about hundreds of different options in the marketplace. At Sooner Retirement, our primary mission is on educating consumers about how annuities work, and what they can anticipate with different annuity alternatives.
If you have questions about annuities, we can provide you with the answers. So, feel free to reach out to us online through our secure contact form here. Or, if you’d like to chat with an annuity expert right away, just call us, toll-free, at (918) 938-7734. We look forward to hearing from you.