What is an Annuity?

An annuity is a special type of policy issued by a life insurance company. Depending on your needs, you can contribute monthly payments or your may deposit a lump sum. The account gains value either at an interest rate determined when you buy the policy, or at a variable rate. When you are ready to retire, you can withdraw the accumulated value for a fixed period of 5, 10, or 20 years, or you can choose an option that guarantees you will receive regular payments for as long as you live, or for the joint lifetime of you and your spouse.

Tax Advantages

Under current tax law, the account values inside an annuity grow tax-deferred. This means that while your interest is accumulation, it is completely free of current federal income tax. You earn interest on principal, interest on interest, and interest on money normally lost to taxes. You can use your annuity for an IRA or as a non-qualified savings vehicle for your future.

Choosing an Annuity

Several factors enter into choosing an annuity which is right for your particular needs. Especially important in evaluation an annuity are the insurance industry rating an insurance company has earned ("A" or above by A.M. Best); the company's past performance; and the interest rate offered at the time of purchase. You can then design the features which will best accomplish your financial goals.