Everyone needs a retirement plan, if they want to have a financially comfortable retirement. Unfortunately, that can be difficult for small business owners who can’t afford to set up their own 401K or pension plan. Yet there are options available to you. Let’s learn how small business owners could benefit from an annuity.
It Is Cost-Effective
Setting up retirement plan for a small business can bring hefty fees. You’ll pay more in administrative fees than businesses with a thousand employees. Furthermore, an annuity is yours. You don’t have to pay fees to set it up. The commissions come out of the growth on the investment.
A side benefit is that you don’t have to pay annual administrative fees to keep the plan going, though you can continue to contribute to the annuity. Business owners may appreciate the fact that someone else is managing the money, too.
You Have Control
You can decide when you sign up for an annuity. You can decide when you’ll put money into the annuity and if you’ll add more to it down the line. You can decide when you start taking money out of the annuity. You decide what happens to the remaining funds or principal balance when you die, such as whether the payments will continue to your spouse upon your death. Research the options when buying online annuities, so that you find an annuity with the terms and conditions you want.
There Are No Contribution Limits
There are contribution limits on 401Ks and IRAs. There is no such limit on an annuity. This is partially due to the fact that people often put a large lump sum like an inheritance, the cash from the sale of a business or pension plan distribution into the annuity. You can put a million dollars into the annuity all at once or make 100K contributions over the next ten years. There is no limit to the annuity distributions, either. You will receive a distribution based on the value of the principal and the terms and conditions of the annuity. If you put 20 million dollars in, you could easily get a million dollars a year out.
Annuities Offer Protection from Creditors
This depends in part on the laws of your state. However, money in an annuity is often shielded from creditors just like money that has sat in an IRA for years. Funds put into an annuity are generally protected from lawsuits, too. An obvious exception is when you put money into an annuity right before filing for bankruptcy.
It Passes Outside of Probate
The beneficiaries of insurance policies receive the money outside of probate. That is true whether it is life insurance proceeds or the principal payment from an annuity. Note that the same is true of retirement accounts like IRAs and 401Ks and brokerage accounts with a payable on death (POD) or transfer on death (TOD) beneficiary. Unlike these accounts, annuities can have a defined death benefit. That is generally the initial principal amount plus interest minus the value of income payments.