Insurance Awareness
What Is An Annuity? And How Does It Work?
An annuity is an insurance contract that exchanges present contributions for future income payments. Sold by financial services companies, annuities can help reinforce your plan for retirement.
An annuity can provide you with a predictable stream of income in retirement.
The primary benefits of an annuity include:
* Predictable payments: Annuity income payments may be guaranteed for
a set period of time or until the end of your life, or the life of your or
another beneficiary.
* Tax deferred growth: Money paid into an annuity grows on a tax deferred
basis. When you later receive your annuity payments, the earnings
portion of your payments is taxed as ordinary income, while principal is
generally free of tax.
* Death benefits: Depending on the type of annuity you choose, a named
beneficiary can receive payments after you pass away.