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Tax Savings With Annuities, IRAs, 401(k)s


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In the Investopedia article “The Best Retirement Account for You,” Mark P. Cussen reminds us that the best account is different for each individual.  It was back in 1974 that we started seeing qualified retirement plans like pensions and 401k’s.  Eight years later came the IRA, which helps people without an employer plan have tax-deferred retirement savings.  Roth IRA’s were introduced in 1997, then Roth 401k’s and 403b’s.  Annuities are another way to accumulate tax-deferred retirement savings and are not under the umbrella of ERISA regulations.

While the author adamantly points out that no plan is best for everyone and individuals must do their research, he does give his opinion as the most important options for certain groups of investors.  IRA’s, SEP plans and self-employed 401k’s are best for self-employed individuals.  An IRA or Roth IRA is good for lower income individuals, while people looking to save more than $20,000 a year should look into one of the last two savings plans.  Anyone who has an employer sponsored retirement plan, especially if they match any of your contributions, should definitely look into that.  When you retire, you can transfer it to a 401k annuity to have guaranteed lifetime income.

If your income is too high for Roth IRA contributions, you can look into an employer Roth IRA plan.  Those whose income exceeds all qualified plans should look into non-qualified plans like executive bonus plans and deferred compensation plans.  Annuities are a product that any investor can use to accumulate money tax-deferred.  The money placed in an annuity is not deductible, but there are no limits on how much you can invest.  The IRS can give you more information on tax savings if you need it.

Written by Rachel Summit

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