Should I contribute to variable annuity or a taxable account?

I'm self-employed. I've maxed out my SEP IRA as well as my traditional IRA (I can't contribute to a Roth due to income). I also have a variable annuity with Fidelity. I want to save even more for retirement. Should I fund my variable annuity or contribute to a taxable account?

Retirement Savings, Annuities, IRAs
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June 2017

This is an excellent question and one many people are faced with on a regular basis.

In order to answer this specifically for your situation I believe we would need a bit more information.  For example, do you have enough monies set aside that are not in retirement accounts in case of emergency or need of cash?  I will assume that you do have enough outside of your retirement accounts based upon your question and are simply looking for additional ways to put more monies away tax deferred for retirement.

I would recommend looking into a Solo K plan as a replacement for your SEP.  The Solo K may allow you to put an additional $18,000 ($24,000 if you are over the age of 50) up and above what you are putting away in your SEP.  

You could also have a Roth component to your Solo K that would allow you to put post tax dollars away and have them grow tax free.  You can only contribute a maximum of $18,000 ($24,000) combined between the traditional and Roth components of the Solo K, not $18,000 ($24,000) each.  This will allow you to contribute monies to a Roth and not be subject to the income limitations.

I would suggest that a variable annuity be your last resort, after exploring the options above first.  Should you still have the need/desire to invest additional monies tax deferred then I would suggest looking for a no-load variable annuity structure.  This will give you the least expensive options for a variable annuity.  These investment products are very complicated and you will want to make sure you understand what you are investing in prior to doing so.  I would recommend reviewing these options with a fiduciary.

Best of luck with your investments!

June 2017
June 2017
June 2017
June 2017