annuity age restrictions
Because they are a long-term, retirement planning instrument, most annuities have provisions that penalize investors if they withdraw funds before accumulating for a minimum number of years. Also, tax rules generally encourage investors to prolong withdrawing annuity funds until a minimum age. However, most annuities have provisions that allow about 10-15% of the account to be withdrawn for emergency purposes without penalty. According to the terms of your annuity, they have to give you 50% of that increase up to a maximum of 10%. Since 50% of 30% is 15% which is 5% higher than the pre-set yearly maximum of 10% you will get credited with 10% of your original deposit or in this case $2,000. If you will reach full retirement age in 2017, the limit on your earnings for the months before full retirement age is $44,880. Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings. At the end of the first year, your annuity is worth $52,500. You need $12,000. You can withdraw 10% of the $52,500, or $5240, without any penalty whatsoever. The additional $6760 you need will cost you approximately $500 in surrender charges. Before Age 59 1/2. You should never withdraw funds from your annuity before you reach the age of 59 1/2. If you do, the Internal Revenue Service will charge you a federal income tax penalty of 10 percent of the amount of money you take out. For example, if you withdraw $500, you will pay a penalty of $50. Are there age limits for annuities? You can normally buy an annuity as soon as you are 55 – you do not have to have retired in order to be able to do so. There used to be a rule that you had to buy one by the time you are 75, but this regulation has been abolished. However, your own scheme may still have an 'age 75' rule. If you have several different pensions, you do not have to use them all to buy an annuity at the same time. You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn. Typically, you would choose this type of annuity if you have experienced a one-time payment of a large amount of capital, such as lottery winnings or inheritance. Immediate annuities convert a cash pool into a lifelong income stream, providing you with a guaranteed monthly allowance for your old age. A Period Certain annuity is only for a fixed number of payments or years. If you have a 10 year certain immediate annuity you (or your beneficiary if you die) are guaranteed to receive payments for a total of 10 years. The payments stop after 10 years even if you are alive. Finally, a Certain and Life or Life with Period Certain annuity is a combination of the previous two structures. COMMISSIONS/FEES. The difference between the annuity and these other investments is that in most cases, annuities carry the highest commission percentage of them all, which is why brokers love them so. Usually the fee that the person earns by selling you an annuity is around 5% to 6%.
You should never withdraw funds from your annuity before you reach the age of 59 1/2.