Choosing an Annuity

What Accountants Need to Know

Bruce L. Resnik, JD, CPA/PFS

An annuity is a special kind of insurance contract that can be a very useful tool for creating income for individuals when they retire, as well as in certain other situations. Annuities represent one of the very few ways an individual can get a check for life. The types of annuities available have proliferated over the years. These instruments often come with liquidity restrictions; significant fees; surrender charges; and varying rights, riders, and endorsements, making them difficult for most potential purchasers to understand. Many individuals frequently turn to their accountants for assistance when considering an annuity. CPAs can use the following basic information to help their clients choose the annuity that will be right for them. Understanding annuities may become more important than ever, considering recently proposed IRS regulations that would make annuities more flexible and useful for retirees.