What is an annuity?

An annuity is a type of financial contract between an insurance company and a buyer. In exchange for monthly payments or a lump sum, an insurance company pays out income, either through a series of payments or in a lump sum. Annuities aim to provide a guaranteed flow of income through a set period of time or until the annuity owner’s death. If you are receiving Social Security or retirements from a company pension plan you are receiving annuity payments.

What happens to my annuity after my death?

Annuities are written contractual guarantees that the annuity owner will receive guaranteed payments for life even if the sum of payments received exceeds the amount deposited into the annuity by the annuity owner. Annuities are the only product that will guarantee the annuity owner payments for life. Annuities have a death benefit, which ensures that, if the annuitant dies before all their payments are disbursed, the remaining assets can be transferred to a spouse or other surviving beneficiary.

What is the difference between an annuity and a traditional savings account?

When you put money in your savings account or bank CDs you are able to withdraw the money as you need it, however, the income you earn from a savings account or CD is subject to immediate taxes. An annuity, on the other hand, interest grows tax deferred. This tax deferral of interest allows the annuity to compound at a faster rate than saving or CDs for greater benefits when withdrawn. You can withdraw money from the annuity as needed.

Do I have to pay taxes on my annuity?

Annuities have a tax-deferred status. This means that they are not taxed until they are withdrawn, which can increase the amount of earnings in your annuity on a compounded basis.

Will my beneficiary have to pay taxes on my annuity?

Once your annuity payments are disbursed to a spouse or other beneficiary, it will be treated as a
taxable income.

What are the benefits of an annuity?

One of the main benefits annuities offer is tax-deferred growth. Additionally, since you can structure your annuity to disburse payments until your death, they ensure that you won’t have to worry about outliving your money.

Am I a good candidate for an annuity?

Annuities can be beneficial for people in 50s and 60s, or people who are close to retirement and looking to build additional income. If you do not have much in your retirement plan now annuities can leverage your retirement income to a higher amount than what you could get from your current retirement.


Information shared on this web page is for general information purposes only. It does not constitute legal, tax, investment, or other advice, nor is it intended to recommend any particular investments products, legal documents or financial instruments. Always seek advice from your financial advisor, attorney, or accountant with regard to investments, legal, or tax questions.

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