Annuities Vs. Brokerage Account Retirement Withdrawals

Having a plan in place for your retirement is important and this should include considerations for taking money from your retirement accounts as needed for expenses.

Having Strategy

Being inattentive to your investments and withdrawals can lead to a precarious situation.

By paying attention to the ups and downs of the market, you can make more informed decisions as to which accounts you pull from and when.

Having a diversified portfolio will also help by providing more options for where to pull funds depending on what is happening in the markets.

Annuities

In a down market, an annuity offers the ability to keep your brokerage funds invested and pull from somewhere less impacted by market volatility.

Annuities can provide monthly income in the form of lifetime income in exchange for the sum originally invested. Some annuities can also remain partially liquid, allowing for a penalty free amount available each year for income needs.

All annuities function differently and have varying requirements surrounding withdrawals and liquidity. Their stability is also predicated on the reliability of the financial institution backing them. Be sure to consider your options with a financial professional before selecting an annuity that is right for you.

Variable Annuities are tax-deferred and have no contribution limits. They do, however, often have high fees and are very complex. Their growth is dependent on the owner’s selected investment portfolio.

Fixed Annuities guarantee an interest rate on the investor’s contributions to the account and growth is also tax-deferred until income begins to be drawn from the account. The downside of a fixed annuity involves terms of a decade or longer and hefty fees if more than 10% of the account value is surrendered before the surrender period comes to a close.

Indexed Annuities provide guaranteed returns and market-based returns, though the guaranteed return might only be applied to a small portion of the premium paid. Indexed annuities also often include caps and floors on returns. Indexed annuities typically have less risk than a variable annuity and a potential for higher gains than a fixed annuity.

Back-And-Forth

When the market is down, selling holdings for income may result in a loss. This might be a good time to withdraw from your annuity and consider reinvesting into stock while prices are lower.

When the market is up, utilizing your gains as income leaves more of your principal invested in both your brokerage accounts and annuities. Read more on retirement withdrawals here.

Regardless of the current state of the market, speaking with a financial professional before making any decisions is always a wise choice.

To schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff member is awaiting your call Monday through Friday, 9AM to 5PM.

Sources:

[1] https://mooreswealthmanagement.com/withdrawing-from-retirement-accounts-where-to-turn-to-first/

[2] https://www.kiplinger.com/retirement/retirement-withdrawals-how-to-be-strategic

All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.

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Advisory Services Network, LLC does not provide tax advice.  The tax information contained herein is general and is not exhaustive by nature.  Federal and state laws are complex and constantly changing.  You should always consult your own legal or tax professional for information concerning your individual situation.

Variable Annuity (*if IAR is also a registered rep with a Broker/Dealer, variable annuity advertising may need to be filed with FINRA through their Broker/Dealer)

 Variable annuities are offered only by prospectus.  Carefully consider the investment objectives, risks, charges, and expenses of variable annuities before investing.  This and other information is contained in each fund’s prospectus, which can be obtained from your investment professional and should be read carefully before investing.  Guarantees are based upon the claims paying ability of the issuer.

Variable annuities are long-term, tax-deferred investments designed for retirement, involve investment risks, and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59† unless an exception to the tax is met.