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Monday, April 22, 2024

Why annuities make sense for the self employed


An annuity is a financial product that provides a stream of payments in exchange for a lump sum payment. It can be a great option for self-employed individuals looking to secure their financial future. Here are some of the reasons why a self-employed person should consider buying an annuity:

Guaranteed Income: An annuity provides a guaranteed income stream for life, which can be particularly appealing for self-employed individuals who do not have access to traditional pension plans. This can provide peace of mind and help them to plan their finances effectively for the future.

Tax Advantages: Annuities have favorable tax treatment compared to other investment products. The income from an annuity is taxed at ordinary income tax rates, and a portion of each payment may be tax-free.

Inflation Protection: Annuities often include an inflation protection feature, which means that the payments increase over time to keep pace with the rising cost of living. This can help to ensure that the income received in retirement will be sufficient to maintain the individual's standard of living.

Estate Planning: Annuities can be used as part of an estate planning strategy, as they can provide a way to transfer wealth to beneficiaries in a tax-efficient manner.

Diversification: Self-employed individuals often have a significant portion of their wealth tied up in their business. Buying an annuity can provide diversification and reduce the risk associated with relying solely on the success of the business.

In conclusion, buying an annuity can provide self-employed individuals with a range of benefits, including guaranteed income, favorable tax treatment, inflation protection, and diversification. It is important to carefully consider the different types of annuities available and to work with a financial advisor to determine the best options for their unique needs and circumstances.

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[Submitted by USPA]

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G. DePretis

G. DePretis

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