Annuity Benefits


What are the benefits from an annuity?

Apart from tax advantages, an annuity also offers you the following benefits:

  • Guaranteed Income and Flexibility of Withdrawal: An annuity is the only investment plan which can provide you a guaranteed lifetime income stream. If you wish you can also withdraw the whole amount in a lump sum or withdraw only a small sum as and when you need. You may even wish to let the money grow tax deferred for you to withdraw in the event of an emergency or leave it as a legacy for your heir. No probate is necessary if you clearly specify your beneficiaries. This makes it easier for them to receive the payment. 
  • Flexibility of Contributions: Unlike the 401(k) plans or IRAs, the Federal law does not impose any limit on the amount of money you are allowed to invest in your annuities annually. Furthermore, you also have the choice to pay in installments or in one lump sum.
  • Deferred Taxes: Unlike most other investments, by investing in annuities, you can actually save on your earnings. During the accumulation phase, the contributions you make towards your annuity are invested and all earnings grow tax deferred during that period. When you start withdrawing your money, these earnings are treated and taxed as ordinary income only. This means you actually save on your investment earnings.
  • Bonus Income: Sometimes you are offered a bonus, like an additional bonus, which helps to increase your annuity’s principal.

What happens if you withdraw funds early?

An annuity is a long-term retirement plan and there are charges or fees if you take your money out before a specified period of time. But, there are many fixed annuities that allow you to take 10% out of your money without any charge for it.

What are the taxes on an annuity?

Earnings from your annuity grow on a tax-deferred basis and you do not have to pay any taxes on your annuity earnings until you withdraw funds.