Annuity Investments By Chris W Phelps

Withdrawal Rules are Key When Investing in an Annuity

My annuity provides me with peace of mind during my retirement years thanks to the guaranteed regular payments that it offers. And it's flexible - I can decide to receive my annuity payments once a month, every quarter, once a year or all at once. I could choose to receive my payments over a set number of years, or spread out over rest of my life.

But as flexible as annuities are, there are still certain rules one must follow when investing in them. Ignoring these rules can cut back the income available to you during your retirement years.

Withdrawing From Your Annuity

Similar to traditional or Roth IRA's, the most important annuity rules relate to withdrawals, and when you can remove cash from your annuities.

When you contribute to an annuity, you must keep your cash in it until you reach the age of 59-and-a-half, just like with IRAs. You will have to pay penalties if you withdraw money from an annuity before you hit this age.

Any money that you take out early will be taxed as ordinary income. Additionally, you'll have to pay a 10 percent early withdrawal fee for taking money out of your annuity before 59-and-a-half. There are sometimes even penalty and surrender fees that annuity providers will also charge you. So it's never a good idea to withdraw money early from your annuities if you can help it.

Study the Rules before Investing in an Annuity

Before investing in an annuity, you should be careful and understand the fine print provided by the insurance company behind the investment. This fine print is where you will find hidden fees, surrender charges, and other possible penalties that may come with a particular annuity. Reading the fine print can save from headaches in the future.

Work With a Professional Financial Advisor

Finally, before investing in any annuity -- or any other investment vehicle - It is a good idea to speak with a licensed financial advisor. They will study your personal financial situation and be able to determine the type of annuity which is best for you. An advisor can also help you find a respected insurance provider with which to work when you want to invest in an annuity.