Many people struggle to understand annuities and wonder if they really need one or not. To help shed light on this situation, let’s look at one example.
“Tom,” a 60-year-old widower, purchased an annuity 20 years ago. Should he re-purpose or replace the annuity with a more tax-efficient asset such as life insurance?
Most individuals who purchase a deferred annuity find that, at retirement, they no longer need it for income purposes. In many cases, the intent is to pass the funds to their beneficiaries. While a deferred annuity can be a great way to accumulate funds for retirement, it generally is not an efficient vehicle for wealth transfer because it has the potential to be taxed twice at death.