Do the benefits of the new annuity under a 1035 exchange, such as a higher interest rate or more flexibility, offset the withdrawal charges?
- If a client decides to switch annuities, be sure to use federal tax form 1035, which avoids both income tax and the IRS penalty for early withdrawals by allowing for tax- free exchanges.
- Variable annuities are subject to market risks; investors can lose earnings and principal. If a guarantee of principal and/or earnings is needed, fixed annuities or the fixed-interest options of variable annuities may be more suitable.
- Annuities have drawbacks when it comes to tax control. If the owner dies while the annuity is accumulating, all deferred taxes on the contract's growth become due, reducing the annuity's value.
- Many companies pay high commissions for annuity sales. If the same investor bought commissionable mutual funds, depending on the investment, he or she probably would pay less.
Back to Top | Next
Ohio National is not affiliated with, nor does it endorse or sponsor, any particular prospecting, marketing or selling system.
