Annuities are loans that are remunerated back over a certain set period at a given set interest rate with equal and steady payments in each period. Common examples of annuity are home mortgages or car loans.
How Annuity Borrowing Works
Once you set up your annuity, you leave it to mature for years or decades, where you may decide to transform it into your retirement income. It is at that time that you can choose to request a loan from the annuity accumulated money. Here the process is very simple. Request a loan form from your insurance company. You fill the form and then sign it. After around 2 weeks, you will have your check.
How Annuities Are Taxed
Annuities are only taxed when they are withdrawn. When you fund your annuity with pre-tax dollars, all you will withdraw will be taxed using regular income rates. But if you fund your annuity using after-tax dollars, only your earnings will be taxed that is determined using the exclusion ratio.
Common Types of Annuities
- Fixed Annuity Loans
Here, these are annuities that remunerate a particular fixed amount of money, despite how well the annuity investments perform.
- Immediate Annuity Loans
Also referred to retirement annuities. Payment begins when the lump-sum acquisition remuneration is made to your insurance company.
- Deferred Annuity Loans
For this, annuity payment is made later in the future after a certain agreed period. It is the opposite of immediate annuity loans.
- Variable Annuity Loans
Payment on this annuity depends entirely on how well the annuity investments perform. So you can either make high or low payments. Thus it is the only annuity where losses can be experienced.
In conclusion, an annuity loan has great benefits accrued to it. The benefits include creating an income stream for post-pension age; thus, you don’t have to worry about saving for your old age, getting tax-deferred income, and family provision. Reach out to Painted Horse Financial today and get your annuity loan to safeguard your future.
