Have you ever bought something that you really weren’t sure what exactly you were getting into? Perhaps the person from whom you purchased it focused on the positives and possibly even minimized or avoided the disadvantages of the product. Maybe the product was complex but it sounded good at first blush. For many people, variable annuities fall into this category. Fortunately for you, this doesn’t have to be the case because you’ve found Annuity Genius. Today we’re specifically examining the myths surrounding variable annuities.
- They provide tax benefits. While it is true that non-retirement account annuities provide tax-deferral, when withdrawing the money in the future you are hit with ordinary income taxes on the earnings instead of the more favorable capital gains tax rate. This often results in a short-term immediate tax benefit at the expense of a longer-term tax burden.
- They’re great to pass on to heirs. Actually, this isn’t true: non-retirement annuities are usually bad to leave as an inheritance. In an annuity, the heir is usually forced to either annuitize, resulting in taxes for the income stream, or take the lump sum, which would result in income taxes on the earnings portion.
- They’re guaranteed to increase in value. What often is not known is that you have to either annuitize (turn on the income stream) or pass away to actually end up with this guarantee in the long run. In other words, it’s a lifetime commitment because if you decide in ten years to walk away from the annuity, you do not get the guaranteed return.