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What is an Annuity and why should I have one?

Annuities are one of the most overlooked investments available today,  mainly due to a lack of knowledge regarding the product. The two basic types of annuities are Deferred and Immediate. A traditional Deferred Annuity is similar to a ‘Certificate of Deposit’ (CD), where your original deposit and interest are GUARANTEED for the amount of time you designate. However, the investment is held by an Insurance Company rather than a Bank. Deferred Annuities are available in both ‘Single Premium’ and ‘Flexible Premium’ options, Flexible Premium annuities allow for future deposits to be made.

Are their tax advantages with an Annuity?

Unlike Bank CDs, all interest and growth that is not withdrawn from a Deferred Annuity owned by an individual are tax-deferred! Under current Federal and most State tax laws, you do not have to pay income taxes on your earnings until you make withdrawals. This allows you to keep more of your own hard-earned money working for you! And in most cases, annuities also pay a higher interest rate than Bank alternatives! The tax deferral on earnings is a powerful tool, which is usually not fully understood by most investors. 

Compounded growth for the win!

When you pay taxes on the growth of an asset you not only lose part of your earnings, but you lose the opportunity you would have had for more growth on the earnings had you not paid the taxes. This has a staggering compounding effect, please use our ‘power of tax-deferral calculator’ to see how much more money you keep for yourself when you keep all your earnings and growth working for you. Annuities also offer safety, asset management, and many other advantages. In addition, annuity proceeds are paid at death to your stated beneficiary FREE from Probate! This of course saves time and expense, which is prudent Estate Planning.  In addition, earnings and growth reinvested in a deferred annuity and not taken do not count as income when calculating any tax liability for your Social Security Payments.

Can I take money out of an Annuity?

Most Deferred Annuities also offer some liquidity. Most products allow you to take your interest after 30 days and many products allow withdrawals of up to 10% of the accumulated account value each year without penalty. So you have higher returns versus Bank alternatives, liquidity, and tax advantages all in one package (withdrawals prior to age 59 1/2 are generally subject to a 10% penalty).



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