Should you put an annuity inside your IRA? The answer is a definite MAYBE.

An ongoing dispute among financial advisors concerns the question of whether it is ever a good idea to include an annuity in one's Individual Retirement Account. (IRA)

As is often the case with personal finance questions, the answer is not that cut-and-dried. On principle, people who hate annuities will always say that you should NEVER have an annuity in your qualified plan, claiming it is redundant, like wearing two pairs of gloves or using two umbrellas in a rainstorm.

Financial experts who generally dislike the annuity product follow the same reasoning line as those who discourage buying tax-exempt municipal bonds inside an IRA. They believe that putting a tax-deferred annuity inside an already tax-exempt plan like an IRA or SDIRA is a waste of time because you only get one tax deferral.

This argument assumes no reasons other than preferred tax treatment for purchasing an annuity in a 401k plan. Whether or not to include an annuity in your qualified plan depends on your awareness of your short-term and long-term goals, specific income needs, risk tolerance, and problems for which you need solutions.

ROTH IRAs and annuities: Sensing that their taxes may be going up in the future instead of down, some people have transitioned to Roth IRAs.

A Roth allows them to pay their taxes upfront while crossing their fingers that our government won't change the rules when they are ready to retire. 

However, if you want and need more growth in your Roth, an annuity might not be a great choice. If the peace of mind of having a lifetime income in retirement is essential to you, using an annuity strategy can help you obtain that.

Annuities to Offset the RMD

Even well-planned investors and savvy investors cannot escape the dreaded "Required Minimum Distribution" (RMD). 

When you turn 70 ½, the IRS says you must begin taking money out of your traditional IRA, even if you don't need that money. RMDs are an annual occurrence from that point until you die. It would be best to plan for your RMD distribution to avoid an unpleasant surprise at tax time.

Single Premium Immediate Annuities, or SPIAs, can help offset or fully meet your RMD requirement. An SPIA will also provide you with lifetime income you cannot outlive and allow you to leave a legacy for your loved ones. Annuities providing lifetime income can also be designed to pay joint life with a spouse. "Joint life with spouse" means that even though this annuity is part of your personal IRA, it can be structured so that 100% of the unused portion will go to a designated beneficiary when you die. The annuity company won't keep a dime.

Whether to purchase an annuity within your qualified plan is a question that is not black or white. There are several things to consider, including "opportunity cost" and potential fees associated with the product. 

The bottom line is that annuities are complex products that must be regarded as any other investment or saving choice. You should know what you want your money to do and ensure that your chosen annuity can meet that need. Just because your financial advisor doesn't like the idea does not mean that putting an annuity in your IRA is the wrong choice. It merely means you need to exercise care and due diligence in the decision-making process. 

To avoid making mistakes that can derail your financial plans, never decide to purchase an annuity alone. It would be best if you got opinions from qualified, trusted experts who are willing to explain the pros and cons related to your risk tolerance and retirement and income goals.