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The focus is on annuities that are not part of a qualified plan, although the basic differences between qualified and non-qualified annuities are discussed.State taxes and federal estate and gift taxes are not discussed; however, these taxes may also affect annuity owners.While annuities make sense for some, they are not the best choice for everyone.If you've recently been sold an annuity that you now realize just doesn't make sense for you, you may be able to get out of it unscathed by exercising your "free look" provision.For example, some contracts may allow you to liquidate the annuity without penalties if you need the money for a health emergency such as open heart surgery.Locate the "free look" provision clause in the contract.This is a kick-the-tires grace period in which you can terminate the policy and get your money back without paying a surrender charge.Free-look periods differ by state and insurer but usually last between 10 and 30 days after purchase.
But retiring clients who already have money in annuities are likely to be more interested in the most efficient methods of getting the money out, either now — or later.
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The following is provided for educational purposes and is not tax or legal advice.
If an annuity contract is part of an employer-sponsored retirement plan, such as a 401(k), premiums are plan contributions and generally not includible in the employee’s income when paid.
However, if an annuity is used in a “Roth” type of arrangement, such as a Roth 403(b) annuity, the premiums are includible in income.