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  • Annuities and Tax

    An annuity is simply a “series of payments made at equal intervals.” That means that your mortgage, insurance, savings, and pension are all annuities. Mostly what makes something an annuity is the regularity of the payments. But the kind of annuity we are talking about here is the kind of long-term investment where you pay into it over time, and then you collect payments from it over time – often for life.

    How Annuities Work

    Usually, the funds that are paid into the investment are tax-deferred until you start accepting annuity payments. The taxes you pay are only regular income taxes too, which means that you pay taxes on the income just like you would any other income you receive. However, you can purchase annuities with after-tax money too. If you do that, you don’t have to pay taxes when you receive it until you receive your principal back. All earnings from annuities are subject to ordinary income tax.

    Immediate Annuities

    The two types of annuities, immediate and deferred, both require you to pay ordinary income tax on your earnings. An immediate annuity is when you give the entire principal to the insurance company, and then they invest the money and set up equal payments to you for your whole life right away with no waiting.

    Deferred Annuities

    As mentioned above, you can also buy an annuity with after-tax money – in which case only a portion after your principal is taxable. The deferred annuity means that you may not receive payment for several years while you keep investing your money and let the money keep growing tax-deferred until retirement. After that, the rules are the same; you pay taxes on the income you receive from each payout.

    Ordinary Income Tax

    You only pay taxes on your earnings at the ordinary income tax rate. What’s really exciting about this is that once you retire, your income will go down as you won’t have income from working. You may then be receiving social security retirement, your annuity, and other investment payouts. But at least on the annuities, you’ll only pay ordinary income tax on your earnings.

    Annuities are a good idea if you believe you’re going to need a set income for life. You will pay ordinary income taxes on it and you don’t get a better deal than you’d get if it were considered capital gains, but you do get a safe investment that guarantees you money for life. It’s all dependent on what risk level you like to take on investments. And, as always, it’s a good idea to diversify your investments so that you have many options when you retire. As to how annuities are taxed in states versus the federal government in the USA, you will have to check with your state as it’s different in each one.

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  • 5 Rules for Entrepreneurship

    5 Rules for Entrepreneurship

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    1 – Find a need and fill it. It seems obvious, but so many companies and individual entrepreneurs just to not follow this most obvious rule. Sometimes, however, they do manage to create a need or desire with the product itself. But most often, the customer has a need and requires your product or service to fulfill that need. There are always needs that have to be filled, and, if your company can supply that needed service or product, it will do even better!

    2 – Find a problem and solve it. Like your customer’s needs and wants, they also have problems. If your company can solve that problem, they you will probably succeed. It’s linked very closely to their needs. For example, a customer needs more money. The problem is a lack of money. Your financial education system will fill that need and solve that problem! If a customer needs more time, the problem is a lack of time. Your time management system will fill that need.

    3 – Focus on the customer. How many companies have fallen away from this one? And how many are starting to fall away? Very recent surveys have shown that customer service is the most important part of a business. Without a customer-focused program, the company will likely get a bad image, and lose customers, and it will likely have some financial setbacks… You get the idea. Without customers, the company can not even stay open, let alone do anything.

    4 – Put your time, talent, energy, and your whole heart into producing a product or service they will buy. If you do not already have an established company, of even if you do, you must always remember to invest into the business. Not always financially either. Invest your time and energy into making what the people want, need, and will use to solve their problems. Put your heart into the company, and the company will put the dollars into your pocket. You would be surprised at how many business people just do not put enough time into their companies.

    5 – Start small. It’s great to keep your dreams big, and your successes bigger, but you just can’t start your company or a new product with a large output. Start off small. Small test runs. Small production amount. Small output of money. You will save a great deal of time, energy, and money than had you started out big and failed dramatically.

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    Source by Arthur Langton

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