Annuities - What You Should Know First

Annuities can be a great part of an investment strategy for retirement. They offer tax deferred growth, the opportunity for a secured principal, and can offer many of the same growth opportunities as stocks and mutual funds. However, despite the many benefits, annuities are not right for everyone. Whether or not a variable, fixed, or index annuity is right for you, depends on many factors. In this article we will explore those factors, and address some of the questions you may have.

Although most people purchase an annuity with "money for retirement" on their mind, there is not necessarily a correct or incorrect age to purchase an annuity. An annuity can be purchased before retirement, as a tax deferred way to increase your money for retirement. It can also be purchased during retirement. Since you will be receiving payments at that time, it doesn't have the same tax deferred benefits, but it still can offer great benefit to people looking for a secure investment which protects their principal, provides monthly payments, while often providing them with a higher return than CD's or Government Issued securities.

One of the main issues to consider when purchasing an annuity is liquidity. Most annuities have penalties and taxes, if a withdrawal is made before the growth period ends. Until you are 59.5 years of age, you are unable to withdraw your annuity investment, without receiving a penalty. On top of the penalty your insurance company may charge, this will include a 10% IRS Tax penalty. Even after the age of 60, some annuities still come with penalties from the insurance company, if you'd like to take out more than your monthly payments. You should always consider your financial position and the liquidity of your other assets before deciding on a long-term annuity.

Although annuities are tax deferred, they are not as valuable as the tax deferred benefits you get from an IRA or 401k. This is because the money invested into your IRA or 401k is from pre-taxed funds. The money used to purchase the annuity, have already been taxed. If you have additional space, you should always fill your 401k, before purchasing an annuity. Once that space is filled, an annuity offers you additional tax deferred investment opportunities that other investments don't.

There are many reasons to purchase an annuity, and a number of reasons why you shouldn't - it all depends on your given situation. How lucrative your annuity investment is also depends on the type of annuity you get. Some insurance agents are better than others - and some more accurately represent your needs, than others.

Need research, on variable, fixed, or indexed annuities? Get variable annuity quotes or online information about variable annuities

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