Retirement education, in plain English

Fixed indexed annuities are the wrong choice for a lot of people — including some of the people they get pitched to hardest. If you may need the money soon, want maximum growth, would be committing most of your savings, are years from retirement, or don't fully understand the contract, an FIA is probably not your answer. Here is each of those, plainly.

If you buy a fixed indexed annuity through me — or any licensed agent — the insurance company pays the agent a commission. You don't write the agent a check, and with an FIA the premium you pay goes into your contract; the carrier pays the agent separately, out of its own costs. That doesn't make the arrangement free of conflicts. It makes it an arrangement you should understand before you sign.

A fixed indexed annuity's protections — the floor of zero, the credited interest, the income rider if you choose one — all depend on the insurance company's ability to pay its claims for decades. You can check any carrier's financial strength yourself, for free, in about ten minutes, using the rating agencies that grade insurers. No agent's word required, including mine.

Retirement money can move from a 401(k) or IRA into another retirement account — including an annuity held inside an IRA — without creating a tax bill today. The clean way is a direct rollover: the money goes straight from one institution to the other and never lands in your hands. The version that trips people up is the 60-day rollover, where a check comes to you and a clock starts.

A bank CD pays a fixed rate you know upfront, for a term usually measured in months to a few years, with FDIC backing within its limits. A fixed indexed annuity credits interest tied to a market index — zero in down years instead of a loss — for a longer commitment, backed by an insurance company. Neither one wins across the board; they do different jobs. A CD's maturity date is simply the one moment when running the comparison costs you nothing.

Before you sign anything annuity-shaped, ask the person selling it three questions: How does the floor actually work? What limits my growth? And what does it cost me to get out early? An agent doing the job answers all three plainly, with numbers from the actual contract in front of you. A pitch changes the subject.

A Roth conversion moves money from a tax-deferred account — a traditional IRA or an old 401(k) — into a Roth IRA. The amount you move is added to your taxable income that year and taxed at ordinary rates. In exchange, the converted money then lives in an account where qualified withdrawals are free of federal income tax under current rules, and where required minimum distributions do not apply during your lifetime. In one sentence: you pay a tax bill you can see now to remove one you cannot see later.

A required minimum distribution — an RMD — is the smallest amount the IRS requires you to withdraw from tax-deferred retirement accounts each year, starting at age 73. The withdrawal is taxed as ordinary income whether you need the money that year or not. That single word — required — is why 73 changes your tax picture: income you used to control becomes income the calendar controls.

Under the SECURE Act, most non-spouse heirs — adult children especially — must empty an inherited IRA within 10 years of the owner's death. Money coming out of an inherited traditional IRA is taxed as the heir's ordinary income. That is the whole rule. It quietly rewrote what "leaving the IRA to the kids" actually delivers.