Best Annuities in Florida

No, annuities are not FDIC insured because they are insurance products, not bank products. Instead, annuities are backed by the financial strength of the issuing insurance company and are protected by state guaranty associations. Each state has a guaranty association that provides coverage (typically $250,000 to $500,000 per owner per insurance company) if an insurer becomes insolvent. This is why choosing a financially strong insurance company is critical.

Annuity earnings grow tax-deferred, meaning you don't pay taxes on gains until you withdraw money. When you take withdrawals, the earnings portion is taxed as ordinary income (not capital gains). If you purchased the annuity with after-tax dollars (non-qualified), only the earnings are taxed. If purchased with pre-tax dollars (qualified, such as from an IRA), the entire withdrawal is taxable. Withdrawals before age 59½ may also incur a 10% IRS early withdrawal penalty.

A qualified annuity is purchased with pre-tax dollars, typically through an IRA or employer-sponsored retirement plan. All withdrawals are taxed as ordinary income. A non-qualified annuity is purchased with after-tax dollars. Only the earnings portion of withdrawals is taxed (using the LIFO method — last in, first out). Non-qualified annuities have no contribution limits, while qualified annuities are subject to IRA or plan contribution limits.

The ideal age to purchase an annuity depends on your goals. For deferred income annuities, buying between ages 50-60 allows time for the income base to grow before you need income. For immediate income, ages 65-75 typically offer the best payout rates. MYGAs can be purchased at any age for guaranteed returns. Generally, annuities make the most sense for people within 10-15 years of retirement or already retired who want guaranteed income.

What happens depends on the type of annuity and the options you selected. Most deferred annuities include a death benefit that pays your beneficiary at least the account value or total premiums paid (whichever is greater). With income annuities, you can choose options like period certain (payments continue to beneficiaries for a set period), joint life (payments continue to a surviving spouse), or life only (payments stop at death). Choosing the right beneficiary options is an important part of annuity planning.