By Wade Mayo

Tax season is coming to a close, making now a great time to start thinking about how you can minimize your payments next year. Additionally, if you are coming up to retirement or are already retired, you should consider how you can structure distribution of your retirement funds to minimize the taxable result.  One planning choice is to use indexed annuities.

In the most basic terms, an indexed annuity is a tax-deferred product, meaning that the tax on the growth of your money is deferred until you take the funds from the annuity. However, an important distinction when analyzing your financial plan is that an indexed annuity can fill multiple roles in your retirement planning:

1. Indexed annuities offer tax deferral for both qualified and non-qualified products, meaning that you will get the tax benefits whether you purchase your indexed annuity through your employer-sponsored or IRA plan or  not.
2. Because indexed annuities offer tax-deferred growth, they earn a greater return on money over time than a taxable alternative investment paying the same rate of interest. With tax-deferred growth, money grows faster as interest is earned on dollars that would have otherwise be paid annually as taxes on interest. As the principal earns interest and the interest compounds, more money is accumulated over a shorter period time. Tax is due on the interest only as the money is withdrawn from the annuity.
3. In addition to offering protection against market volatility, indexed annuity policies and riders can provide a guaranteed amount of annual  income for your life.  You do not have to bear the financial risk of living too long!  There are numerous income distribution options available to meet your situation, and you should discuss with your insurance agent which one is right for you.