Benefits of Using an Annuity to Fund an IRA

[Justin Bilyj]

I wanted to understand the advantages of using an annuity to fund an ira, or roth ira. Does it matter if its roth or traditional? I am competing with a money market fund for a roth ira of a prospect who wants to open one up soon.
He is young.

Is there advantages or disadvantages to funding an ira/roth with an annuity depending on if they are young or old?

Appreciate the advice!

 

[moonlightandmargaritas]

Is there advantages or disadvantages to funding an ira/roth with an annuity depending on if they are young or old?

Why would you put tax-deferred inside of tax-deferred?

 

[xrac]

Why would you put tax-deferred inside of tax-deferred?

You tend to do it for guarantees and to avoid market risks. Annuities are always about guarantees. Even a fixed annuity should be able to give a guaranteed return slightly higher than a MM.

 

[scagnt83]

Why would you put tax-deferred inside of tax-deferred?

Its about the other features of the Annuity. An Annuity does a whole lot more than just defer taxes. Taxes have nothing to do with the decision.
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I wanted to understand the advantages of using an annuity to fund an ira, or roth ira

An IRA is just a tax classification attached to an Investment/savings vehicle of some sort. No matter what "funds" the IRA (no matter what the investment is), the taxation is the same.

So the real question is what features in a funding vehicle are you looking for?

If you consider the features of an Annuity an advantage, then those would be the advantages.

Is there advantages or disadvantages to funding an ira/roth with an annuity depending on if they are young or old?

Again, the question is "are there advantages or disadvantages to buying an annuity depending on if they are young or old"

It's about the Annuity, not the taxation. Taxation is a constant.

Does it matter if its roth or traditional?

You can put an Annuity in either a ROTH or Traditional IRA.
And yes, it is still tax-free withdrawals if you go with the ROTH (everyone asks that for some reason...?)
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I am competing with a money market fund for a roth ira of a prospect who wants to open one up soon.
He is young.

Something about this isnt right.

Why is he considering a MMF? You say your in competition? With a Stock Broker? Or is he looking at Etrading it?

This just seems off. Maybe he is ultra conservative. But no way in hell a young person should have MMF as their end game in a retirement account.

If this is a broker your competing against, chances are the plan is to just temporarily park it in the MMF until a dip in the market.

 

[Justin Bilyj]

It's a friend of mine, thinks it will be easier and a better bet to have an mmf/bank cd etc. as his roth funding vehicle. He thought about going to the bank to open one up.

 

[xrac]

It's a friend of mine, thinks it will be easier and a better bet to have an mmf/bank cd etc. as his roth funding vehicle. He thought about going to the bank to open one up.

If he just wants to start a Roth I would select a good no load mutual fund family money market fund. It will usually pay more than the bank although none of this stuff is paying anything. Vanguard and Fidelity are a couple of options.

 

[Justin Bilyj]

I am not securities licensed so I dont think I can sell mmf etc.

 

[xrac]

I am not securities licensed so I dont think I can sell mmf etc.

You cannot. How much money are we talking about here?

 

[Justin Bilyj]

Nothing large, prolly 50-100 a month.

 

[xrac]

Nothing large, prolly 50-100 a month.

Most annuities have a minimum to invest in them.