Deferred Income Annuity

By Nathan Goodwin

New rule allows for use of IRA money to purchase deferred income annuity

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In the past, a deferred income annuity, or “longevity insurance” as it is also called, could not be purchased with money from qualified accounts. However, as of July 2, 2014, you can use up to 25% (or up to $125,000, whichever is less) of the total balance of your IRA or other qualified account to do just that.

The Treasury Department and IRS have presented these changes as part of an ongoing effort to help retirees manage their savings in retirement. Specifically in focus here is longevity risk; the risk that someone will outlive their assets. A deferred income annuity helps to offset this risk by offering a guaranteed income stream for life. There are some restrictions however, such as a requirement that annuity payments start by age 85.

If you have questions about how these new regulations could affect your retirement, feel free to contact us anytime.

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