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Craig Lundquist, MBA, ChFC®, CRPC®
VP of Wealth Management
651-773-2757
Kristin Becker
Senior Administrative Assistant
651-773-2821
Ideal Wealth Advisors
Located at Ideal Credit Union
8499 Tamarack Road
Woodbury, MN 55125
CRPC conferred by College for Financial Planning
March/April 2023
Maxed Out Your Retirement Plan Contributions?
Super retirement savers often contribute the maximum allowed to tax-qualified retirement accounts like 401(k) plans and IRAs. If you’re a super saver, what do you do if you want to contribute more to a tax- deferred account?
Depending on your situation, one vehicle that may make sense is an annuity.* Purchasing an annuity can help you put additional tax-advantaged dollars away for retirement and avoid the annual taxes that investing in taxable investments may bring.
A Taxing Dilemma
You can purchase an annuity with multiple payments or a lump sum, and begin taking income payments almost immediately or deferred to a later time. This focus is on nonqualified deferred annuities.People who contribute the maximum allowed to their qualified retirement accounts may have to take high, mandated required minimum distributions (RMDs). This can be a taxing problem because high RMDs may bump taxpayers into a higher tax bracket. This is exacerbated if they also receive income elsewhere. And the higher the retirement income, the more Medicare Part B will cost. For example, in 2023 monthly premiums ranged from $164.90 to $560.50, depending on income. Anyone who turns age 73 in 2023 must start RMDs no later than April 2024.
Defer Retirement Income
A deferred income annuity may help you avoid this tax dilemma because you choose to begin taking payments whenever you want. So, you might take higher qualified distributions from other sources early in retirement, and then begin annuity payments later as other distributions get smaller.If you are risk-averse, an annuity can provide relative safety. Fixed annuities may not be the best choice if you think you may need to begin annuity payments during the first six to 10 years, when significant surrender charges occur. If you want income now, consider an immediate annuity.
Rules for qualified and nonqualified annuities may differ. Your financial and tax professionals can tell you more about how an annuity might benefit you and affect your taxes in retirement.
*Annuity products are not FDIC-insured, and their guarantees are backed solely by the claims-paying ability of their issuing life insurance company. Distributions from traditional annuities are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.
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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Ideal Credit Union and Ideal Wealth Advisors are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Ideal Wealth Advisors, and may also be employees of Ideal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Ideal Credit Union or Ideal Wealth Advisors. Securities and insurance offered through LPL or its affiliates are:
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