Annuities versus IRAs

A person calculates the amount of money to save.

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Annuities versus IRAs

Throughout your career as an agent, you will provide countless services to people looking to prepare for retirement. There are tons of recommendations you can give to them about saving money, taxes, medical insurance, wills statement, and income diversification. In the following article, we will be making an essential comparison of the fundamental differences between Annuities versus IRAs.

Differences between Annuities and IRAs

Annuities and IRAs are well-known savings tools for those who seek to maximize and diversify their source of income in retirement years or use them as a fund for the acquisition of important assets such as a home, paying for college education, or paying for medical emergencies.

Have you ever wondered how Annuities versus IRAS can be differentiated? Which one should you choose? Which one is the best? Let’s take a look at both.

Annuities and IRAs are both products that offer tax advantages over retirement savings. Some of the most important differences between the two include:

• IRAs are a means of holding retirement investments, while annuities are an insurance product in and of themselves.

• An annuity has higher service costs but does not have annual contribution limits, while IRAs only allow you to deposit a set amount annually.

• In general, IRAs can only have one owner, while annuities can have additional owners.

What is an IRA?

IRAs are individual savings accounts with tax benefits. There are several types of IRAs, but the most common and well-known are Traditional IRAs and Roth IRAs. The most significant difference between Traditional IRAs and Roth IRAs is that the Traditional IRA allows you to make pretax contributions, so when you withdraw the money, you must pay the corresponding taxes. In contrast, the Roth will enable you to make contributions after tax, which means you will not have to pay additional taxes when you withdraw your money.

IRAs are an excellent vehicle to grow your savings, primarily as retirement income. IRAs are designed for clients to begin withdrawing funds at age 59 ½. If a client takes out money before that age, the person may suffer a penalty.

What is an Annuity?

Annuities are a financial product that works like a contract between an individual and a financial institution. The main idea of ​​an annuity is to create an alternative savings fund during retirement and thus mitigate fears about the lack of funds during this stage.

There are many categories of annuities structures. However, we will focus on the two most common annuity structures: fixed and variable. Fixed annuities provide a regular periodic payment to the taxpayer based on their contributions to the contract and a fixed percentage of growth over the principal.

Variable annuities depend on the performance of the funds in which the taxpayer is investing and may have the opportunity to receive more profits on that contribution. Variable annuities have a higher risk margin, but these can be mitigated by adding extra features to the contract to guarantee the principal contributed in case the investment portfolio does not perform well.

Clients can withdraw annuities at a specified time. They can choose between a period of 2 to 10 years. If the client wants to withdraw the money before the stipulated time, they will receive a monetary penalty.

How to choose between annuities versus IRAs?

It is of the utmost importance to consider preparing for retirement, and IRAs and annuities are an excellent vehicle for this situation. As agents, it is essential to ensure customers understand each product’s benefits and limitations before committing their money to any of them. Before making a decision, clients should consider the purpose, time, and amount of money they want to contribute to these products.


We hope that this information on annuities vs IRAs is useful to you.

Empower Brokerage is dedicated to helping you make informed decisions about your health and finances. Whether it’s through webinar training, one-on-one calls, seminars, or marketing plans, we want you to be successful!

Give us a call at 888-539-1633 or leave a comment below if you have any questions.

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