Are Annuities a Good Investment

Are Annuities a Good Investment

There are two different types of annuities: deferred annuities and immediate annuities. The type of annuity you choose depends on how soon you expect to receive payments. If you are looking for a long term investment where you plan on making withdrawals once you reach retirement then you might choose a deferred annuity. If you are looking to make withdrawals sooner than you may want to choose an immediate annuity.

English: Types of Annuities
English: Types of Annuities (Photo credit: Wikipedia)

Either type of annuity can be fixed or variable. A fixed annuity acts like a CD from a bank but in this case it is an investment with an insurance company. You have a fixed interest rate that you receive for the annuity and it is usually a higher percentage than a normal CD would bring at a bank.

The guaranteed interest payment from these fixed annuities as well as the minimum amounts that you have to invest makes the fixed annuities appealing for those who are not confident in the ways of the stock market.

Another nice thing is that you do not have to pay taxes on the interest gained until you decide to start withdrawing the money from the annuity. A disadvantage with fixed annuities is that the interest rates might be high to begin with but can drop after the first year of having the annuity. This unknown factor can be a turn off for some who are hoping that they can maintain the rates that they first received when they started their annuity.

If you do not like the new rates and want to withdraw your annuity before it matures then you might be stuck paying surrender charges that will cut into your profits. With a variable annuity you can choose from a variety of investments to put your money into and the rate of payment you receive depends on how well the investments performed. With variable annuities you invest in several different stock or bond like accounts that will help your investment grow over a long period of time. Just like with the fixed annuities you pay no taxes on your gains until you begin withdrawing from your account.

Although with variable annuities you may have an opportunity to have greater growth potential with your investment there are some drawbacks as well. The investments you chose may take a turn for the worse causing your potential growth to plummet. There are drawbacks with the tax rates when you decide to withdraw you money,as well as fees if you decide to withdraw early and there can be high sales commission fees. It is good to do your research before you decide which annuity is best for you or even if an annuity is a good investment.

Tax debt: Ways in which you can pay off IRS debt

If you think that you are having problems with tax debt, there are various ways in which you can pay off your tax dues. If you are having financial problems in general, you can include your tax debt in your debt consolidation. You can consolidate debt in order to pay off all of your unsecured debts. However, there are some other tax debt pay off options too.

Tax debt pay off options

The Internal Revenue System or the IRS offers you various payment options that can help you to pay off your IRS taxes easily enough. The different pay off options are:

1. The installment agreement – In installment agreement you are allowed to make monthly payments.

Some of the different installment agreement types are –

  • Partial payment – If you don’t even have the ability to make minimum payments too, partial payment is the most suitable tax debt relief option. Under this payment option you can make the payments as per your affordability. However, the IRS will re-evaluate your financial situation every 2 years.
  • Guaranteed – If you owe less than 10,000 USD to IRS, guaranteed installment agreement is one your viable tax debt solutions. If you want to qualify for installment agreement, it is essential for you to acknowledge that you will file your taxes and pay it off within the right time for the coming years. However, you may not be eligible for this type of payment if you had made payments through this payment plan.
  • Streamlined – In streamlined payment option, there is no requirement for you to fill out 433-F Form which IRS needs to analyze your finances. However, if you want to make tax payments through this agreement, the amount which you owe should not exceed 25,000 USD. In addition, you may also require to agree to 60 month pay off period with the IRS.

2. Offer in Compromise – In OIC, the IRS does not require you to pay the full amount which you owe. The offer in compromise is more like the debt settlement pay off option. However, the IRS needs you to agree to some terms and conditions before making payments through OIC, else the IRS can even revoke your OIC.

3. Currently not collectible plan – Under the currently not collectible plan you are not required by the IRS to pay your due taxes for the time being. If you do not have enough cash in your hands, this might be your best tax debt pay off option.

However, if you want you can also take the help of a debt help attorney who can provide you in handling and paying off your tax debts.