Retirement Income

Understanding Annuity Income Riders

Hans Scheil

August 20, 2024

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Today, we’re diving into the topic of annuity income riders—a crucial component in retirement planning that guarantees a steady income stream for life. Annuity income riders are offered by numerous insurance companies, each with their own approach to providing financial security in retirement. Let’s explore what these riders entail and how they can benefit you.

What is an Annuity Income Rider?

An annuity income rider is an optional feature that can be added to an annuity policy. Once attached, it ensures a predictable income stream starting at a chosen date, typically after several years of accumulation. This income is guaranteed for the rest of your life, offering financial stability regardless of market fluctuations or economic uncertainties.

Why Choose an Annuity Income Rider?

Tom emphasizes the importance of income during retirement. While assets are crucial, they need to generate income to sustain your lifestyle once your regular paycheck stops. Annuities with income riders provide a solution by converting a portion of your savings into a reliable income source that lasts as long as you live—benefiting both you and your spouse if chosen.

How Annuity Income Riders Work:

Chart Utilization: Charts provided by insurers like Midland National help determine payout percentages based on your age and chosen withdrawal start date.

Joint Lifetime Options: For couples, the rider considers the age of the younger spouse to calculate payouts that continue as long as either spouse is alive.

Considerations and Benefits:

Insurance Company Stability: Payouts are backed by the insurance company, ensuring reliability.

Legacy Planning: Any remaining cash value can be passed on to beneficiaries if you pass away before exhausting the annuity.

Conclusion:

Annuity income riders provide a vital tool in retirement planning by offering guaranteed income for life. They serve as “longevity insurance,” ensuring that you won’t outlive your money. Whether using IRA funds or other savings, these riders can be tailored to meet specific income needs in retirement.

For personalized advice on incorporating annuity income riders into your financial plan, reach out to us. Planning for retirement involves careful consideration of your unique circumstances and goals. Let us help you secure a stable financial future.

Thank you for joining us on this Cardinal lesson.

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Retirement Income

Understanding Annuity Income Riders

Hans Scheil

August 20, 2024

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Sign Up For Our Newsletter To Receive Weekly Updates.

Understanding the Upcoming 2026 Income Tax Increase: What You Need to Know

A Brief History of the Tax Cuts and Jobs Act (TCJA)

In today’s Cardinal lesson, we’re discussing the significant changes coming to income tax rates in 2026. This isn’t a proposal but a law already set in motion. The Tax Cuts and Jobs Act (TCJA), passed in 2017 and effective from January 1, 2018, brought about substantial reductions in income taxes. However, these reductions were only funded for eight years, meaning they will expire at the end of 2025.

What Changes to Expect in 2026

As of January 1, 2026, the tax rates will revert to their 2017 levels, adjusted for inflation. Key changes include:

The 12% bracket will increase to 15%.
The 22% bracket will rise to 25%.
The top rate of 37% will revert to 39.6%.

Not Just a Proposal

It’s crucial to understand that this change is already the law. Many people mistakenly believe that the tax rate increases are still under discussion. However, unless Congress enacts new legislation, these higher rates will take effect as scheduled.

Implications for Your Financial Planning

Impact on IRAs and 401(k)s

With the current lower tax rates, now is the time to consider strategies like Roth conversions. By converting funds from a traditional IRA to a Roth IRA now, you can potentially save a significant amount in taxes over the long term.

Why Planning Ahead is Crucial

For individuals with substantial retirement savings, understanding these changes is vital for effective tax planning. The window to take advantage of the current lower tax rates is closing, and planning ahead can make a significant difference.

Case Studies and Planning Opportunities

Hans Scheil and Tom Griffith discuss specific case studies and planning strategies in our latest video. These examples illustrate how different scenarios can be managed effectively:

Case Study 1: A married couple with an adjusted gross income of $150,000 in 2024 can convert part of their IRA to a Roth IRA, taking advantage of the lower current tax rates.
Case Study 2: High-net-worth individuals with large IRAs can save substantial amounts in taxes by planning conversions over the next two years.

Estate Tax Considerations

The TCJA also doubled the estate tax exemption, which will revert in 2026. This change can significantly impact high-net-worth individuals, making estate planning more crucial than ever.

Action Steps to Take Now

Review Your Current Tax Situation: Analyze how the upcoming changes will affect your finances.
Consider Roth Conversions: Take advantage of the lower tax rates before they expire.
Plan for Estate Taxes: Assess your estate plans in light of the changing exemptions.

Conclusion

The changes coming in 2026 are significant, but with proper planning and informed decision-making, you can navigate these changes effectively. Watch our video for more detailed insights and personalized advice.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Have questions? Contact us today.

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