- Understanding Different Types of Annuities
- May 18, 2017
Regardless of gloomy economic forecasts, there are always a variety of options for investors, and because annuities are tax-deferred, they’re often an attractive choice.
An annuity is created when an insured party gives life insurance companies money that gets distributed back to the insured party over a certain period of time.
There are several kinds of annuities. Immediate annuities can be fixed or variable. A fixed immediate annuity payment depends on the amount contributed, the age of the investor and the interest rate at time of purchase. Fixed annuities guarantee a certain payment amount.
Typically, both types are relatively safe, low-yielding investments.
A tax-deferred annuity pays out to investors who prefer payments to begin at a future date, typically retirement, allowing income tax to be deferred until the money is withdrawn. One of the advantages of having an annuity is that an investor can contribute as much money as he or she likes each year.
There are a number of advantages to investing in an annuity. A tax-deferred annuity allows you to put aside funds you pay into the annuity for as long as you want without worrying about exceeding federal tax limits.
Investors also have more flexibility. An annuity provides a variable or a fixed return – without federal tax limitations.
“Annuities have a long history of producing guaranteed income and tax-deferred accumulation,” advised Brian Ashe, President of Brian Ashe and Associates, Ltd. in Lisle, Ill., and Treasurer of the Life and Health Insurance Foundation for Education (LIFE). “They certainly need to be considered as a possible financial tool in a portfolio.”
Also, there is added security. An annuity offers a fixed-income payout option that grants an income that cannot be outlived, according to the LIFE Foundation.
For many people, annuities offer an opportunity to accumulate funds that are free of income and capital gains taxes. And that can help provide a guaranteed stream of income in the future or pay for other large investments such as to pay for your child’s college tuition.
- Category: Articles Library, Life Insurance
Life Insurance Quotes
Leave a Reply