What is a tax-deferred annuity? A tax-deferred annuity is a contract between you and the insurance company with guaranteed interest and guaranteed annuity options. There is no upfront sales charges or administrative fees during the term of his contract.

Benefits include tax-deferred annuity tax deferral stability can avoid probate, the characteristics of liquidity, and guaranteed income.

One of the main advantages of deferred annuities is the opportunity to accumulate a large sum of money by allowing your premium and interest grow tax deferred. Unlike taxable investments, which pay no taxes on your annuity interest until you begin to take withdrawals or receive income. This lets your money grow faster than in a taxable account, because you earn interest on money that would otherwise have been paid in taxes.

Your tax-deferred annuity is stable and secure. State department of insurance laws require insurance companies to establish and maintain reserves equal to cash surrender value of your annuity contract at any time. In addition, state law requires maintaining a minimum level of insurance companies the amount of surplus capital and greater protection for the contractor.

Insurance companies invest their premium dollars on a variety of investments which are closely regulated by insurance departments. These long-term investments to ensure the stability of the company and help provide a competitive performance.
In the case of premature death, your beneficiaries the funds accumulated in an annuity for you, with most companies can avoid the costs, delays and publicity of probate.

Most annuities give you the opportunity to withdraw funds at any time (subject to surrender charges will apply). Most contracts allow for some form of penalty-free withdrawals after the first contract anniversary. Some also have some riders that increase liquidity in the event of a clinic or if diagnosed with a terminal illness.

Provide a tax-deferred annuity with a guaranteed income tax-deferred annuity. You have a choice between different options for income, including payments for a specified number of years or income for life, no matter how long you live. With non-qualified plans, a portion of each payment that represents return of premium is not taxed, thereby reducing its tax liability of your income payments.

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This entry was posted on Friday, April 17th, 2009 at 7:46 am and is filed under TAXES. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.