Money & Investing - Banks.com

One of the cornerstones of retirement planning is investing. Indeed, it is important to have a good investment portfolio if you are planning on retiring well. This investment portfolio can include a number of investments, including stocks, bonds, mutual funds and other items. And one of the popular additions for retirement planning has been the variable annuity.

Right now, though, the variable annuity has been taking a hit. With interest rates low, they aren’t paying as much. Well, the old-fashioned variety of annuity isn’t. But there are newer variable annuity choices that include such benefits as:

• Wide investment options.
• Guaranteed lifetime withdrawal.
• Better death benefits.
• Bonuses for premiums that you make.
• Lower expenses associated with the variable annuity.

If you have a variable annuity, consider upgrading it rather than getting rid of it. If you simple turn it in for the cash, you will have to pay income tax, possibly a surrender fee and even a penalty if you are younger than 59 1/2 years old. This could completely destroy any sort of value that you would get from cashing it in.

Instead of cashing in your variable annuity, think about the 1035 Exchange. This is a law that allows you to upgrade your annuity, without penalties. Here is what Investopedia explains about the 1035 Exchange:

Under Internal Revenue Code Section 1035, the IRS will let you exchange one annuity for another one, income-tax free. The catch is that the funds must pass directly from the old annuity contract to the new annuity contract. In other words, you cannot accept a check for the old annuity to buy the new one.

You’ll also have to keep the owner and annuitant on the new contract the same as under the old contract, although you can change these once the exchange is complete. In addition, there is no limit on the number of old variable annuity contracts you exchange for new contracts.

Shop around at different companies for a variable annuity that best works for you. Then, instead of getting rid of your old one, make a change for the better.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: retirement planning, variable annuity, investing blog, investment portfolio,
IRS, investments, 1035 Exchange