If you have been considering annuity ownership, you have probably been drawn to the idea of guaranteed payments over the course of an extended period of time. Many people, for example, invest in an annuity product to ensure they have a steady stream of income later in life.
But as Jeanne Sahadi writes for CNN Money, there are a few things that annuity owners must keep in mind, regarding taxes, before they decide to go down the annuity route. By understanding the tax implications of owning an annuity, you can get a better idea of whether you should invest in an annuity or sell your payments if you already own one. The last thing you would want is to retire and have less money than you thought you would have.
The first thing you should know is that not all annuities are taxed the same. There are two categories of annuities: qualified and non-qualified. The payouts on these two categories are taxed very differently. Qualified annuities are subject to income tax because the contributions made on the annuity were not taxed – think 401K or any other tax-deferred account.
Non-qualified annuities are only taxed for a portion of the payments and not the principle as the principle invested was already taxed with after-tax contributions. Specific annuity products may have additional tax rules to keep in mind as well, so it’s important to speak with your financial planner to determine what you should expect to receive once the payments do come in.
In short, yes. If you understand the tax implications of owning an annuity and are comfortable with what you will receive at retirement or when the term starts, you may never want to sell any of your annuity payments. However, if you need cash now and don’t feel it’s worth it to wait, it might make more sense instead to sell your annuity payments to the secondary market. You may be able to rid of yourself of debt and open yourself to new opportunities to strengthen your portfolio and ensure financial stability down the road.
As SellAnyAnnuity.com, we have partnered with annuity buyers that will purchase some or all of your annuity payments for the best offer possible. We have vetted these partner buyers to ensure they exemplify the highest standards in the industry. Please contact us today at 855-407-4033 to start receiving quotes today!
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