When people in Illinois start working on their retirement plans, they often consider annuities. In fact, Forbes notes that fixed annuities have experienced a rise in popularity over the past few years. The main reason people choose an annuity is to have enough income to last them a lifetime. In the past, people relied on pensions for this. However, pensions are no longer a popular offering at companies.
Also, as concerns surface about the Social Security fund potentially running out, many people no longer wish to depend on this for their future financial stability either. Not only may annuities provide a lifetime stream of income for the policyholder, but it may also provide ongoing income for the surviving spouse after they pass away. It is no wonder then why so many people are drawn to this option for retirement planning.
However, CNN reminds retirees and retirees-to-be to consider the tax implications. Failure to do so may cause people to run afoul of tax laws. For instance, federal and state governments may differ in how they treat tax income from annuities depending on where the policyholder lives. It is also important to check tax penalties related to early withdrawals. People who become ill unexpectedly or who are forced into early retirement may have no choice but to tap into these funds ahead of time.
Finally, policyholders may also wish to consider the tax responsibility that may get passed on to beneficiaries when they die. Beneficiaries are perhaps most likely to become liable when policyholders choose to defer taxes on their investment gains.
None of this information is meant to deter people from choosing annuities. They may play a useful role in providing ongoing income during retirement years. However, it is important to do some tax planning ahead of time.