IRA's - Annuities - 529 Plans

• An individual retirement arrangement (IRA), is a personal savings plan.
• Allows you to set aside money for retirement while offering you tax advantages.
• You may be able to deduct some or all of your contributions to your IRA.
• You may also be eligible for a tax credit equal to a percentage of your contribution.
• Amounts in your IRA, including earnings, generally are not taxed until distributed to you.
• IRA's cannot be owned jointly.
• Beneficiary designations should be current.
• Amounts remaining in your IRA upon death are paid to your beneficiaries.

To contribute to a traditional IRA:

• You, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self–employment.
• Taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.
• Compensation does not include earnings and profits from property, such as rental income, interest and dividend income or any amount received as pension or annuity income, or as deferred compensation. 
• The deadline for contributions to a traditional IRA for the year is the due date of your return, not including any extensions of time to file.

Amounts you withdraw from your IRA are fully or partially taxable in the year you withdraw them:

• If you made only deductible contributions, withdrawals are fully taxable.
• Withdrawals made prior to age 59 1/2 may be subject to a 10% additional tax unless the withdrawal meets the IRS penalty waiver guidelines.
• You also may owe an excise tax if you do not begin to withdraw minimum distributions (RMD) by April 1st of the year after you reach age 72. 

(source IRS.gov Topic 451)

Roth IRA

• Roth IRA is an individual retirement plan that is subject to the same overall contribution limits that apply to a traditional IRA.
• To be a Roth IRA, it must be designated as a Roth IRA when it is set up.
• A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.
• Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA, but if you satisfy the IRS requirements, qualified distributions are tax free. 
• Unlike a traditional IRA, Roth IRA contributions are subject to IRS income qualifications.
• You can leave amounts in your Roth IRA as long as you live (no RMD).
• If you make contributions to both Roth IRAs and traditional IRAs, your contribution limit may not exceed the annual IRA contribution limits.  
• Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit.

(source IRS Publication 590)

 

 

Annuities

 

 

 

 

 

 

 

 

 

Annuities are a popular, tax-deferred investment vehicle for those in or near retirement (typically ages 50 to 85) who are looking for:

• A way to save and accumulate money for future needs
• Flexible income benefit options - helping hedge the risk of living too long and outliving your income
• Protection against living too long and outliving assets
• Tax-deferred growth opportunities
• Guaranteed* death benefits  

Deferred Annuity

• A deferred annuity can be funded with either a lump sum or through a series of smaller contributions.
• Earnings accumulate tax-deferred (no current taxes) on your investment.
• You have many options about when and how you receive your income.

A deferred annuity may be right for you if:

• You have several years until retirement.
• You want to accumulate assets on a periodic basis.
• You want to begin payments for your retirement or any other need at a later date.

Income Annuity

An income annuity is funded with a lump sum contribution, automatically securing you a steady stream of income payments for the rest of your life or for a specific time period you choose.

• You select from several income benefit options including lifetime payouts.
• Income Options may be customized to meet your needs.
• Once an income benefit option is selected, you'll begin receiving income checks.

An income annuity may be right for you if:

• You want a guaranteed* payment each month to supplement your income.
• You want to receive payments from your initial investment immediately.
• You want monthly payments from a lump sum.
• You are concerned you may outlive your savings.
• You are willing to forgo access to principal in exchange for guaranteed* income. 

*​Annuity guarantees are based on the claims paying ability of the insurance company and are not backed by FDIC or other Agency guarantees.

Qualified tuition programs (QTPs) are also referred to as 529 plans.

• States may establish programs to allow you to prepay or contribute to accounts for paying qualified education expenses K through post secondary institution including certain apprenticeship programs.
• Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses.
• If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses.
• Some states allow a deduction for payments or contributions to a QTP.
• For a specific state QTP, you need to contact the state agency or eligible educational institution that established and maintains it.

The tax benefit: There is no tax is due on a withdrawals (including gains) from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses.

If a QTP is used to finance a student's education; the American Opportunity Credit, Hope Credit, or Lifetime Learning Credit may still be available. 

Qualified Education Expenses are those related to enrollment or attendance at an eligible education institution at least half time (as defined).

The beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits.

• The beneficiary can be changed after participation in the QTP begins.
• The designated beneficiary can be changed without transferring accounts.
• A qualifying beneficiary change includes members of the benficiary's family.
• The designated beneficiary generally does not have to include as income any earnings distributed from a QTP if the distribution is less than or equal to adjusted qualified education expenses.

The defined beneficiary's family includes the beneficiary's spouse and:

• Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them.
• Brother, sister, stepbrother, or stepsister
• Father or mother or ancestor of either.
• Stepfather or stepmother.
• Son or daughter of a brother or sister.
• Brother or sister of father or mother.
• Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
• The spouse of any individual listed above.
• First cousin.
• There are no income tax consequences if the beneficiary is changed to a member of the defined family. 

Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for qualified education expenses of the beneficiary.

• There are no income restrictions on the individual contributors.
• Individual states plans may impose limits on total account balances or contributions.

Assets can be rolled over or transferred from one QTP to another.

• There is a limit of 1 rollover per beneficiary within 12 months of prior transfers. 

(source IRS.gov Publication 970)

You should consider whether you or your beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.

The guarantee of the annuity is backed by the claims paying ability of the issuing insurance company.