IRA with mutual funds, tax deferred annuities? I heard tax deferred annuities are not protected by the govt if the company becomes insolvent and the tax consequences to your heirs if you die are higher. Any advice?
I plan on investing up to $5k this year in a tax deferred vehicle. What is a good option?
26
May
gosh137
May 26, 2010 at 4:11 am
tax deferred annuities are issued by an insurance company not protected by the govt if they become insolvent but, the mutual fund type investments the annuities hold are a legal separate entity from the insurance company and will not be affected by the insurance company’s bankruptcy. You money will be transferred to a stronger insurance company. It just may take a while to get everything transferred over.
When you take out the money, it will be taxed at your income rate, not at the lower capital gains rate.
I suggest a ROTH IRA with low cost, no-load mutual funds from Vanguard or T. Rowe Price. Check their web sites for details.
PS With mutual funds, the funds themselves are also legal separate entities from the fund companies. If the fund Company goes “belly up”, the fund’s board of directors will just hire another fund company to manage the funds.
Kevin R
May 26, 2010 at 5:10 am
Hard to beat an IRA for tax deferral. I try to contribute the max. Tax consequences vary with each situation and a copetent pro should be consulted. Don’t forget municipal bonds as a tax FREE income vehicle as well.
Annuities are not guaranteed by the government and total losses can occur depending on underlying investment selections.