Investment Planning

Investment planning for a secure retirement involves many difficult decisions. Should I invest in stocks or bonds? Do I have enough money to retire? Will I run out of money because of inflation and rising health-care costs?

Investors want their income in retirement to rise to keep up with the rising cost of living. They also need to minimize their taxes. This article will discuss an investment that can help you grow your money and control taxes: tax-deferred variable annuities.

Tax-deferred annuities are similar to IRAs in that all taxes on capital gains, dividends and interest are deferred until money is withdrawn at retirement. This tax-deferred growth can make an enormous difference. Over a 20-year period, a $100,000 investment growing at 10% annually will grow to $672,750 in a tax-deferred account-versus $365,838 in an investment taxed at 33%, and only $320,713 for an investor in a potential 40% marginal tax bracket. The higher tax rates rise, the more valuable tax-deferral becomes.

In addition to the potential for attractive returns, variable annuities include features such as:

• Multiple fund options. Your choices can include stock, bond and balanced funds, and even international stock and bond funds. Changes in the investment mix can be made with a phone call. Within a single variable annuity, changes can be made with no cost and no tax-for maximum flexibility to respond to changing market conditions.
• Dollar-cost averaging. This proven method of investing allows you to commit a sum of money to a fund in equal installments over time-so you're buying more shares when the price is low, fewer when the price is high. The insurance company will move your money into the fund(s) of your choice over twelve months.
• Guaranteed death benefit. When the owner dies, the beneficiary receives the account value or the invested amount-whichever is greater-less any withdrawals.
• Systematic withdrawals. In retirement, you can automatically withdraw income-monthly, quarterly, semi-annually or annually. The amount can be increased or decreased, depending on your needs. Taxes are paid on income withdrawn-not on what is earned. If the growth in the annuity is greater than the income distributed to you, the excess continues to grow tax-deferred.

The minimum investment in a variable annuity is typically $5,000 or more. There is no maximum contribution.

Invest in Your Future
If you're thinking ahead and have money set aside for retirement, consider investing in a variable annuity. It can deliver a combination of growth, safety, and tax control that you can't find anywhere else.

For more information on a particular variable annuity-including investment results, fees, and a prospectus-talk with your financial consultant Emily S. Hazlett is Vice-President: Investments at ENB Associates a wholly owned subsidiary of Evans National Bank. Securities are offered by O'Keefe Shaw & Co.,Inc. Member NASD & SIPC.

Because of the special tax treatment of annuities, the federal government does impose a 10% excise tax, in addition to ordinary income tax, on withdrawals prior to age 59 1/2, as in an IRA. Annuity products are available through insurance companies and may not be available in all states. Investors considering any annuity should request its prospectus. The prospectus contains complete information, including charges and expenses. Please read it carefully before investing or sending money.