An annuity is a tax deferred savings account issued by a financial advisor at an insurance company. So what are the does this mean to you? Well with an annuity, the principal return is tax-deferred, and you will only pay taxes upon withdrawal of funds. So as your saving - you pay no taxes The result over the long-term is more cash available to earn interest.
When you're ready to withdraw funds from your annuity, you may can choose your pay out option for guaranteed income. With the payout option you can choose to receive either fixed or variable payouts for a specific amount of time. Once your pay out income begins, you will pay taxes only as funds are paid to you. This offers more security and more funds in your account to earn interest.
There are fees associated with the purchase of an annuity. These vary depending on the type of annuity you purchase and may include these charges: administration fee, contract fee, mortality and expense risk fee, and a withdrawal fee. Check with your annuity financial planner to find out the fees you may occur.
There are two ways to receive your funds fixed or deferred. Make sure you choose the correct option for you and your family, because you can't change the payout option or frequency of the payments.
The death benefit provision is another important feature of an annuity. The annuity issuer guarantees that upon your death that atleast the premiums paid into the annuity are paid back to your beneficiaries. An annuity is a simple contract. You will agree to invest a single or series of payments into the annuity investment. In exchange, the company will pay you an income that starts on a specific date.
When you invest in an annuity, the annuity will grow tex-deferred. When you begin receiving income from your annuity, the growth amount of the annuity received will be taxed. More than likely you will be retired when you start to receive your annuity payments. This is beneficial, because your tax bracket will lower after retirement, so you'll pay less taxes.
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