Provide a Safe Investment Product for Your Senior Client
A tax-deferred annuity helps your client to save for retirement with a reliable and flexible investment vehicle. This annuity gives your client:
A tax-deferred annuity is designed for clients of retirement age who are not in need of long-term care. The product receives a competitive rate of return (see below) and taxes are not due on any interest earned until withdrawals are made or annuitization begins.
A tax-deferred annuity can be funded with either non-qualified or tax-qualified funds. Taxation on interest earned is deferred until the time of withdrawal. Minimum investment amounts vary depending on tax-status of the funds ($5,000 on tax-qualified contracts and $10,000 on non-qualified contracts). This product is available in 36 states. Contact our office for specific information regarding options in your state.
We have options available for either a single premium tax-deferred annuity or a flexible premium tax-deferred annuity. A single premium TDA is funded with one, lump sum deposit, either from cash, 1035 Exchange, or transfer from an IRA. A flexible premium TDA allows for multiple deposits over the course of the contract, with a guaranteed interest rate of 1% APY. This option is perfect for those looking to reinvest their RMDs each year or for those that want to open a TDA but have limited funds at the moment. Note product features and availability differ with the flexible premium product.
While not typically used by individuals or spouses of those about to enter a nursing home, should that become the case, the tax-deferred annuity can be annuitized, meaning it will begin making regular payments to the owner. It can also be made into an irrevocable, non-assignable contract, ensuring it meets Medicaid’s strict regulations. This product is designed to empower its owner, not impede their planning options.
In many cases, interest earned on the tax-deferred annuity is accessible to the owner 30 days after purchase. Additionally, most TDA options allow for 15% penalty-free annual withdrawals after the first year. Specific liquidity features vary depending on product purchased and multi-year guarantee term. Please contact our office regarding your client’s options.
The Texas Health and Human Services Medicaid for the Elderly and People with Disabilities Handbook states an annuity funded with tax-qualified funds is considered an exempt resource for Medicaid purposes – regardless of whether the contract is annuitized. As such, Texas Medicaid applicants (or their spouses) with IRAs that would otherwise be considered countable assets have the option of purchasing a tax-deferred annuity with IRA funds in order to immediately exempt the funds. For more information regarding the use of this product in Texas, contact our office.