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What
are Annuities?
An annuity is another option when planning your retirement. Once
an annuity is in place, you are essentially trading your current
premiums for future income. During this process, your annuity
will grow without paying taxes. When investing in annuities you
are not just earning competative rates, but you may also pay less
in current taxes.
Are
there different types of Annuities?
Yes, there are four simple types of annuities. Deferred Annuities,
Fixed Annuities, and Immediate Annuities.
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Each annuity
has its own purpose. Deferred annuities are set in place for long-term
growth. Whereas immediate annuities are created to deliver current
income. Fixed annuities are just like they sound... stable.
What
is Tax Defferred Compounding?
One important advantage of annuities is tax deferred compounding.
You directly earn interest....
- on Principal,
- on Interest,
or
- on Money
you would have paid in taxes.
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Annuities
are long-term planning vehicles. Withdrawals from annuities
are subject to ordinary income taxes. Also, withdrawals during
the first several years may be subject to surrender charges and
withdrawals prior to age 591/2 are subject to a 10% tax penalty.
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