Annuity a good way save money for retirement? (401k, pay, real estate)

[unseengundam]

I used to hear from one my teacher how he used Annuities save up for retirement. Supposedly they have a high rate of 8% and was tax free. This was a few years back.

I have been looking up on Annuities however most of them seem to offer way lower rates. Like 3% or 4%, same amount I get in high interest Saving Account. Are these some how better than IRAs or 401ks?

I think there isn't any income or contribution limits and they tax free. Though about the only benefits I am seeing. Any Info would be helpful.

[sunsprit]

In today's market, those 8% return annuities look good ... but only in retrospect, where they're not paying as much if you get into one of them today.

As of a few months ago, annuities were a very "hot" retirement marketing item. My broker even suggested ... although I'm not sure he wasn't just seeing if I was awake ... putting my total retirement account into an annuity, which was paying 8.5% then. I balked at putting all my money into one company and withdrawing from other good investments (mostly REIT's and real estate). We put only about 15% of my account into the annuity, and that's OK. We're still doing better in other investments through my SEP IRA.

For the most part, I think that annuities are targeted to folks who are not risk takers, want a known guaranteed income per month result at a future time, and don't have a long time window ahead to use their money to better advantage.

You wouldn't want to invest in these through your already tax advantaged IRA or 401K program, as you won't get any more tax break.

In my opinion, you'd be best off consulting with professionals such as your accountant, estate attorney, and investment advisor/broker to guide your investments to fit your needs of ROI, tax advantages, and tempered by your risk tolerance and financial situation.

[forest beekeeper]

Originally Posted by unseengundam

...
I have been looking up on Annuities however most of them seem to offer way lower rates. Like 3% or 4%, same amount I get in high interest Saving Account. Are these some how better than IRAs or 401ks?

I think there isn't any income or contribution limits and they tax free. Though about the only benefits I am seeing. Any Info would be helpful.

3%, 4% is not very much.

'tax-free' annuities only effect that portion of taxes that would have been due on their own growth. they do not effect the tax obligation on your Gross Income.

[LongArm]

Annuities are NOT tax-free (even though some may call them that). They're tax-DEFERRED. You'll eventually pay tax at your regular income tax rate when you make withdrawals.

There are different KINDS of annuities and they're pretty complicated, usually. One thing most of them have in common is they're pushed hard by salespeople (disguised as advisors) because they're big money-makers--for the salespeople, not for you, necessarily. Very often annuities are NOT the best option, for many reasons. Before buying one, I would HIGHLY recommend you talk to a fee-only advisor/planner so you get an educated (hopefully) and UNBIASED opinion on whether an annuity is right for you.

[forest beekeeper]

Originally Posted by LongArm

Annuities are NOT tax-free (even though some may call them that). They're tax-DEFERRED. You'll eventually pay tax at your regular income tax rate when you make withdrawals.

Thank you for the correction. Bless you.

I was not sure. I did not know if there was a possibility that they had found some annuity that was tax-free, so I was willing to assume that the OP knew something that I did not.

In that case, my gawd, get away from those annuities. Just back away before you do something stupid.