During the accumulation period, the money you put into the annuity, less any
applicable charges, earns interest. Unlike other retirement savings instruments, the earnings that occur during the term of the annuity are tax-
deferred. You are not taxed on them until they are paid out. Because of the tax deferral, your funds have the chance to grow more quickly than
they would in a taxable investment.
During the second period, called the payout period, the company pays
income to you or to someone you choose. Again, unlike other retirement savings instruments you will have the option as to how you receive your
funds, i.e. you can choose to receive a guaranteed income for as long as you live.
How do annuities best
serve investors?
The two primary reasons to use an annuity as an investment vehicle
are:
- You want to save money for a long-range goal (like retirement)
- You want a guaranteed stream of income for a certain period of time.
The rest of
this guide will focus on the understanding how annuities works, the various types that exist and what role annuities should play in your financial
plans. |
