Annuity Funds
Annuity Funds
Annuity funds are nothing more than either money invested into an annuity or money received from an annuity. The difference is the time period at which you are at with the annuity.
If you are just opening an annuity, these are funds that will be invested by you. If you already have an annuity, these are funds that will be received by you at some future period of time.
Remember, annuity is a contract between you and an insurance company. Your role is to give the insurance company. The insurance company’s role is to pay you a certain amount of money, on a periodic basis, for a specified period.
Hence, annuity funds become fungible. First, you put them into a contract that was accepted by the insurance company. Then the insurance company takes not only your invested funds but the interest it paid you during the life of the annuity and begins paying you a sum for a specified period of time.
Retirees like this product because it provides them a guaranteed income stream. But, a person doesn’t have to be retired to enjoy an income. A product called the immediate annuity allows a person to contribute a lump sum and immediately begin receiving regular payments.
These payments can either be a specified, fixed amount or variable depending on the annuity you selected. The payment period is usually your lifetime.
The hidden gem in annuities is their tax deferral feature. This means the interest you receive from the insurance company isn’t taxed until you begin to withdraw the money. If you are a young investor and contribute to an annuity, your money compounds over a long period of time. This is a huge advantage over taxable vehicles like CDs and savings accounts.
If you have investable funds, an annuity is definitely a product you should consider. The advantages simply outweigh most investment vehicles that are on the market today. If nothing else, annuities force to save for your retirement. This is a very wise use of your annuity funds.