Many of our clients from Sony have wanted to know more about immediate and deferred annuities. To start off simply, the terms immediate annuity and deferred annuity simply indicate when the distribution phase of the annuity begins. Both allow unlimited contributions, and both can provide, upon election, a continuous stream of payments for life. So, what's the difference?
Immediate Annuities
First, we'd like our clients from Sony to understand immediate annuities. Immediate annuities allow you to convert a lump sum of cash into an income stream. They differ from deferred annuities in that they do not have an accumulation period. They are funded with a single lump-sum payment rather than with a series of premium payments. An annuity option is chosen, and the distribution period begins within 12 months after the purchase.
Immediate annuities may appeal to any Sony clients who want an investment return that they cannot outlive. The distributions are considered partly a return of the original investment and partly earnings. You are taxed on the earnings portion only.
Immediate annuities are also used to provide benefits from a terminated defined benefit pension plan. In this situation, the accrued benefits under the plan are determined for each plan participant, and a single premium annuity may be purchased for each plan participant, with benefits usually starting at age 65.
Another common use is in the structured settlement of lawsuits. In these cases, the parties agree to pay a sum of money not as a lump sum but as a series of payments, often for the life of an injured party. A monthly amount to be paid is agreed to by the parties, and an annuity is purchased that provides that amount.
Deferred Annuities
Next, we'd like to make sure our Sony clients understand deferred annuities. With a deferred annuity, you make a lump sum or a series of premium payments and defer the payout until some time in the future. This is known as the accumulation period. The earnings in the annuity are not subject to taxation until distributed.
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Deferred annuities can provide an attractive investment supplement to IRAs and qualified pension plans such as 401(k) plans.
Note: We'd like our Sony clients to note that annuity guarantees are subject to the claims-paying ability of the annuity issuer. Annuity distributions made prior to age 59½ may be subject to a 10% federal tax penalty unless an exception applies.
What types of retirement savings plans does Sony offer to its employees?
Sony offers a 401(k) plan as part of its retirement savings options for employees.
How can Sony employees enroll in the 401(k) plan?
Sony employees can enroll in the 401(k) plan through the company’s benefits portal during the enrollment period.
Does Sony match employee contributions to the 401(k) plan?
Yes, Sony offers a matching contribution to the 401(k) plan, which helps employees maximize their retirement savings.
What is the vesting schedule for Sony's 401(k) matching contributions?
Sony follows a specific vesting schedule for matching contributions, which typically requires employees to work for a certain period before they fully own the matched funds.
Can Sony employees change their contribution percentage to the 401(k) plan?
Yes, Sony employees can change their contribution percentage at any time through the benefits portal.
What investment options are available in Sony's 401(k) plan?
Sony's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.
Is there a loan option available for Sony employees under the 401(k) plan?
Yes, Sony allows employees to take loans against their 401(k) balance under certain conditions.
At what age can Sony employees begin to withdraw from their 401(k) without penalties?
Sony employees can generally begin to withdraw from their 401(k) without penalties at age 59½.
What happens to a Sony employee's 401(k) if they leave the company?
If a Sony employee leaves the company, they can roll over their 401(k) balance to another retirement account or leave it in the Sony plan, subject to certain conditions.
Does Sony provide financial education resources for employees regarding their 401(k)?
Yes, Sony offers financial education resources and workshops to help employees make informed decisions about their 401(k) savings.