Retirees in Texas have a number of annuity options available to them. Here are a few of the most popular choices, by Bobby M. Collins. Annuities are an integral part of most retirement plans. They can help you save for the future, and provide extra income when you retire or hit another life milestone like the birth of a child. Annuities are designed to make it as easy as possible to get your money in and out, but not all annuities have the same features. In this article, we’ll be looking at annuity education options that are popular among retirees in Texas and around the country. These will give you plenty of new ideas on how to best use annuities in your retirement plan. Patch: https://patch.com/users/bobby-m-collins Presentations: https://www.slideshare.net/BobbyMCollins/presentations Medium: https://medium.com/@bobbymcollins Collins Site: https://collinsandcate.com/ Pinterest: https://www.pinterest.com/bobbymcollins/ YouTube: https://www.youtube.com/channel/UCKIKRPVgRQJ_T-aWZFFvOmA Quora: https://www.quora.com/profile/Bobby-M-Collins

1. Annuity Choices and Tax
Considerations for Retirees
By Bobby M. Collins
Retirees in Texas have a number of annuity options available to them. Here are a
few of the most popular choices.
Annuities are an integral part of most retirement plans. They can help you save for the
future, and provide extra income when you retire or hit another life milestone like the
birth of a child. Annuities are designed to make it as easy as possible to get your money
in and out, but not all annuities have the same
features. In this article, we’ll be looking at
annuity education options that are popular
among retirees in Texas and around the country.
These will give you plenty of new ideas on how to
best use annuities in your retirement plan.
Standard Annuities
If you're looking for an annuity with higher
returns, but don't want to lock your money away,
consider purchasing a standard variable annuity
(SVA). While SVAs provide more investment
flexibility than fixed-rate products, they also
carry slightly higher management fees and may
carry additional risk depending on their
underlying investments. To help minimize these
risks, we recommend working with a financial
advisor who is familiar with SVAs; sometimes they are difficult for non-financial
advisors to understand due to complex payout structures and how many different
variables can affect earnings. It's also important that you fully understand how your
money will be invested and where it will be held before making any type of investment
decision.

2. Annuity Choices and Tax Considerations for Retirees | Bobby M. Collins
Fixed Annuities
The upside of fixed annuities payout steady and predictable returns on your
money—typically at interest rates between 3% and 6%. Another big selling point is their
tax benefits, but it’s also one of their biggest drawbacks: they cannot be liquidated until
you reach retirement age and begin withdrawing your income. (Even then, there may be
restrictions.) When compared with bonds or even certain stocks, which carry greater
risk but could also provide greater returns, annuities can seem like safer bets for retirees
who want to make sure they get steady payouts while they're living off their assets.
Indexed Annuities
An indexed annuity is an investment tool that combines life insurance with growth
potential and tax benefits. However, it comes with more limitations than a standard
variable or fixed annuity.
The main benefit of an indexed annuity is:
● High return on investment
● Guaranteed lifetime income starting at retirement age
● Tax-deferred earnings until withdrawal (typically age 85).
One major downside of indexed annuities is their notoriously complicated and often
misleading sales pitches, especially when dealing with variable indexed or leveraged
products.
A recent survey conducted by Consumer Reports found that 95% of consumers knew
little or nothing about these investments despite their popularity among insurance
companies and financial advisors—and that’s saying something considering how much
information there is online today.
Variable Annuities
The money market side of variable annuities may be worth looking into if you’re
concerned about preserving your capital. Since variable annuities and other types of
annuities typically invest in mutual funds, they will come with higher costs than
non-annuity investments like low-cost index funds and exchange-traded funds (ETFs).
Still, these higher costs may be warranted if an annuity can give you better tax treatment
or other benefits as compared to similar non-annuity options—but do your homework
first! It’s important to keep in mind that annuities aren’t necessarily bad—they just
aren’t for everyone.

3. Annuity Choices and Tax Considerations for Retirees | Bobby M. Collins
Choose Between Single-Premium, Level
Premium, and Indexed Payout Annuities
Single premium, level premium, and indexed payout are all terms used to describe types
of annuities that offer different benefits for people who want certain types of coverage
for their retirement savings. Which one is right for you? It's hard to say without knowing
more about your specific needs and goals, but we can help you figure it out.
Consider Your Required Minimum
Distributions (RMDs) when Choosing an
Annuity
If you do not choose an annuity that allows for Required Minimum Distributions (RMDs),
you must take withdrawals each year and will face steep penalties. You will still be
required to pay income taxes on your distributions even if they don't exceed your RMDs.
Although taking RMDs is mandatory and there is no way around it, some people find
that they want their money immediately rather than using an immediate fixed annuity,
so they can take out more from a deferred fixed-rate and tax-deferred annuity.

4. Annuity Choices and Tax Considerations for Retirees | Bobby M. Collins
Understand How Taxes Affect Your Retirement
Savings
You’ve finally decided it’s time to retire, but there is one major hiccup: your retirement
accounts may not be as financially secure as you think. When you work for an employer,
you are able to contribute pre-tax dollars into 401(k) or similar plans and by doing so,
you lower your taxable income right now—it’s like getting a raise! But once you retire
and begin withdrawing funds from these accounts, they become fully taxable income at
that point in time. In other words, if you withdraw $10,000 from your account today,
you don’t owe taxes on that money.
However, if you withdraw $10,000 five years from now when you retire and begin
taking distributions, it will be considered ordinary income (meaning tax rates will
apply). This can cause a huge spike in what retirees owe each year. So how do you avoid
paying more taxes than necessary?
One way is to utilize certain types of annuities which allow you to defer taxes until a
later date. Annuities can also help protect against market fluctuations and inflation;
another benefit is having guaranteed lifetime income starting immediately upon
retiring. Speak with an expert today about annuity education options for retirees in
Texas.
Deductions and Credits
Another common strategy for lowering taxes owed is to take advantage of deductions
and credits. For example, if you donate a large sum of money to charity during the
course of a given year, you could potentially reduce your overall tax bill by thousands.
The same goes for being energy efficient at home through programs such as energy
rebates. If you buy solar panels, insulation or
energy-efficient appliances such as washers and
dryers, etc., then that money spent on new
equipment can be deducted off your final tally too.
Other strategies include investing in traditional
IRAs and Roth IRAs, both of which offer some
degree of potential tax savings. With a traditional
IRA, contributions are made using pre-tax dollars
and thus taxed when withdrawn after age 59 1⁄2 .
With a Roth IRA , you pay taxes up front instead,
but withdrawals taken after age 59 1⁄2 aren’t taxed
at all. Traditional IRAs offer greater upfront tax
savings while Roth IRAs give greater long-term

5. Annuity Choices and Tax Considerations for Retirees | Bobby M. Collins
benefits—however, both are excellent ways to save for retirement.
Examine All the Details Before Signing
The buyer needs to review all terms and conditions before signing on that dotted line.
Pay particular attention to fees, withdrawal or surrender charges, tax implications and
whether or not there is an expiration date for owning that particular type of annuity.
Look for details about how your assets will be handled if you should pass away and make
sure there is some type of death benefit as well as provisions for living beneficiaries (i.e.,
someone who will receive payments if you die). The owner also needs to ask how often
they can withdraw money from their account with no penalties or fees involved; some
types of contracts may allow withdrawals only once per year while others provide
complete access at any time without cost consequences, so it’s important to know how
much flexibility you really have before making your purchase decision.
Avoid Get Rich Quick Schemes
When searching for annuities for retirees, you will quickly discover that many of these
products come with proprietary features that promise big returns. These features
include automatic premium payments, high-risk investments and more, but they can be
extremely risky - and unfortunately, almost always require large upfront fees or ongoing
annual fees (sometimes as much as 50% of your account value). If you want to avoid get
rich quick schemes when it comes to retirement planning, look into traditional fixed
income products like stable value funds instead; often times these will give you similar
upside potential with a much lower risk profile, plus they'll typically be cheaper overall
than comparable proprietary offerings.
Consider your health when choosing an annuity
If you are fairly healthy and don’t anticipate any major health issues, you may want to
choose a deferred annuity. In order for your insurance company to give you an
immediate death benefit, it must keep your money on deposit for 10 years or more.
Otherwise, it will pay out only upon your death – which might be too late if you need
that money during those first ten years. If you are elderly or very sick when purchasing
an annuity, consider choosing a non-qualified immediate annuity over other types of
insurance products. This kind gives you guaranteed income immediately – and as long
as you live – without having to worry about market risks and fluctuations over time.

6. Annuity Choices and Tax Considerations for Retirees | Bobby M. Collins
About Bobby M. Collins
Bobby M. Collins works in DFW, Denton County, Amarillo, North Texas, Abilene and
even some West Texas locations.
He started Collins and Cate Retirement Income Professionals in 2002 to help find the
best annuity product for the right person through individual meetings, often traveling
over three hundred miles a day to personally meet with clients.
Bobby M. Collins, who is a US veteran serving
overseas, is married to his wife Kari, has two
children and two wonderful grandsons, and lives
in Wichita Falls, Texas.