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Cape Cod Wealth Strategies
& Insurance Services, LLC

What is a Deferred Annuity and Should You Start One?

For those who are retirement-minded investors, annuities are a great option that can compliment an existing 401k retirement account and other individual retirement accounts. Annuities are mostly saught after due to their tax deferral benefits as well as their large monetary contribution rate. One of the most popular types of annuities is a deferred annuity.

What is a Deferred Annuity?

A deferred annuity works similarly to a 401k plan such that any contributions you make now you will not be able to access until years or decades later. However, the advantage here is that your contributions grow tax-deferred within the annuity. Once you have reached retirement age, your deferred annuity will now be accessible to draw from along with your employer-sponsored retirement plan.

How Premiums Come Into Play When Contributing to Annuities

Depending on how much you are contributing to your annuity there may be a limiting factor involved. Insurance companies are only willing to accept premiums of anywhere from $500,000 to $3 million, so if you are looking to contribute more than this amount then you may need to split the amount with multiple insurance companies. Cape Cod Wealth Strategies and Insurance Services, LLC works with insurance companies such as Vanguard, New York Life, Fidelity, Morgan Stanley and more, so we will be able to work with you to determine where you can allocate your retirement funds.

Our financial planning company on Cape Cod may also suggest qualified longevity contracts (QLACs) which do not have contribution limits and help turn retirement money into income during retirement.

Is a Deferred Annuity Right for You?

Deferred annuities are a great option for those who feel they need more financial support during their retirement years. Oftentimes 401k accounts may not meet retirement lifestyle needs. Annuities also allow individuals the ability to have access to large amounts of money in an emergency situation. For instance, medical bills from surgeries and long-term care can be paid using deferred annuities.

Keep in mind that most annuities have early withdrawal penalties, so it's important to discuss with our financial strategy and retirement planning company about what option is best for you. Contact us today to request a free consultation!