F6
FARM & RANCH
THE NORTH PLATTE TELEGRAPH
DECEMBER 2021
WHAT SHOULD I DO, “TAX-DEFERRED”
investments are backed by the insurance company and guarantee your deposit with a guaranteed interest rate for the length of the contract. But unlike CD’s, some annuities allow you to make additional contributions during a specific time period and allows interest to be compounded and is tax- deferred until it’s withdrawn. Unlike CD’s, annuities let you remove funds without penalty in case of disability, nursing home confinement, or death so it’s a little more flexible. It also doesn’t have to go through probate upon death. You can leave it directly to your designated beneficiary. Interest rates on annuities are substantially higher than a CD but just like CD’s they are in for a contracted period of time. For example, you may have a 3 year or 5 year annuity. Some annuities also pay bonuses in the first one or two years. For example, the annuity may pay 3% for the life of the contract with a 1% bonus for the first year meaning it pays 4% the first year and 3% for the remainder of the contract.
Another nice feature with annuities is that they allow you to take out up to 10% or 12% per year (depending on the company) without penalty. You can purchase these with “qualified” money-transfers from an IRA, 401(k), SEP, or with current pre-tax income. You can also purchase it with after-tax dollars such as savings, money from the sale of a home or business, an inheritance, or insurance benefits. Finally, when you’re ready to withdraw money, there are several pay-out options including having the annuity pay out over a fixed number of years or a life income with guaranteed period. For example, if you put in $100,000, you can set it up to pay out “10 year certain with lifetime guaranteed” meaning that you would have the $100,000 pay out in monthly (or annual) installments over 10 years. If you died within the 10 years, your beneficiaries would receive the remaining payments over the 10 years. If you didn’t die within the 10 years, you would continue to receive payments for the rest of your life.
These are great to ensure you don’t run out of money as you age. Pretty nice! There are lots of varieties of annuitieswithseveral companies. If you like more risk, you can get a variable annuity that is tied to the market or an indexed annuity that has little risk to your principle but keeps your toes in the stock market. If you don’t like risk, think about a fixed annuity that is safe and secure and with no loss of principle unless you pull it out early. Again, these are insurance products so you’ll need to talk to your insurance agent to look at the options. PS…for those of you still needing health insurance (under age 65), open enrollment continues until Jan. 15, 2022. The Health Insurance Marketplace has eliminated the hard cap on the income so now you can get help paying for your insurance plan if your insurance costs more than 8.5% of your income. If you have questions, call Rebecca Nordquist at Phares Financial at 532-3180 or email at RebNordquist@msn.com.
By Rebecca Nordquist, RD, MHA, CLTC
You just got paid for the corn crop, the bank is paid, or you just had to pull funds out of your IRA due to your Required Minimum Distribution, (RMD) and now you have some funds that you’d like to tuck away. Youwant something safe and secure, maybe a CD at the bank, unfortunately, it’s making less than 1% interest. In addition, a CD will generate a 1099 every year for the interest. Ouch! Not only is the interest rate low and isn’t keeping up with inflation, but every year, you have to pay taxes on the interest that you haven’t withdrawn. Darn it! Have you ever heard of an annuity? Where banks put out a product called a CD, insurance companies have a similar product called an annuity. These
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