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Roth IRA Annuities

Both the Roth IRA and the annuity are popular choices as retirement income investments. A combination of the two, known as a Roth IRA annuity, is a good way to combine the advantages of both annuities.

How It Works

Simply put, the money that you invest into your Roth IRA is placed in an annuity through which it is invested in a selected fund, bond, or stock. A Roth IRA is a tax sheltered account, but contributions are not tax deductible. Annuities also have tax advantages, and some of those advantages will overlap and give you extra benefits that you wouldn’t get from either option on its own.

By investing into an annuity through your Roth IRA, you can obtain the guaranteed income that comes along with an annuity but also have the tax-free withdrawals that come with investing in a Roth IRA. You will also be bound by the contribution limits of the IRA rather than investing the amount of your choosing, as with a regular annuity.

Returns On Investment 

Investing in an annuity through your Roth IRA may or may not be a good idea. It is important to understand what your return on investment will be and have a good idea of which option will benefit you most. A financial advisor can help you determine where the best return lies and help you understand the market trends that can affect your investment.

The main difference between a Roth IRA and an annuity in terms of return is that you will get monthly payments from your annuity based on the interest it is earning. A Roth IRA does not provide monthly payments, but does offer tax-free withdrawals. Both types of investment can place your money in various funds, stocks, and bonds. The choices offered by your annuity may offer a higher return, or the return may be higher elsewhere; it is important to consider, however, that the annuity has a better guarantee of return on investment and thus somewhat less risk.

The best way to determine if a Roth IRA annuity is the right choice for you is to take the time to sit down with a financial expert and look at your choices. Your insurance agent who provides annuities can help you look over your options and make the investment choice that is best for you. Knowing your current financial state and your goals for retirement, an insurance agent and financial services expert can guide you in making the best moves for your future.


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