What is an Annuity?

An annuity is a contract between an individual ("annuitant") and an insurance company. The annuitant agrees to pay the insurance company a single payment or a series of payments, and the insurance company agrees to pay the annuitant an income, starting immediately or at a later date, for a specified time period. Under current tax law, money put into an annuity grows on a tax-deferred basis until the annuitant begins receiving his accumulated fund as an income. That means that one hundred percent of your earnings are reinvested in an annuity and allowed to compound-- or grow - - without having to pay taxes on earnings.

Life insurance pays your family cash benefits when you die.

Annuities typically begin paying you an income when you retire and may continue paying you an income for as long as you live. (Most annuities stop paying money when you die; though some annuities can continue paying money to your family after your death if you select that option.)

In the past, annuities were considered investments only for people nearing retirement. But today, annuities can be smart investments for people of all ages. Remember, an annuity can be invested in a variety of different investment instruments, offering everything from modest to fast capital growth alternatives. The following are good uses for annuities:

• You need a higher interest-rate alternative to Certificates of Deposit(CD's) and money market funds
• You want to make your long-term savings grow faster without current taxation.
• You need to save more for retirement, but you have "maxed out" your IRA and 401(k) or 403(b).
• You need to roll over (reinvest) existing tax-deferred savings, like pension plans.
• You need to guarantee yourself an income for the rest of your life.
• You need to guarantee yourself an income for the rest of your life and your spouses life.