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How Can Annuities Help You

Annuities are smart investment tools delivering both tax benefits and income growth potential for the big and small investor. In addition, annuities make it simple to create retirement income streams that supplement other retirement accounts. If a potential investor is looking to diversify his or portfolio, decrease taxes, and create immediate or deferred income streams, than purchasing an annuity might be the right type of investment for them to consider.

An annuity is a contract purchased by an investor from an issuing insurance company for a promise of repayment at some later date. They allow for accumulated funds deposited within the investments during the accumulation phase, to grow and defer any taxes on that growth until the investor makes a withdrawal. This “tax free” growth period can have a tremendous positive effect on most investor’s future payouts.

Certainly a favorite among savvy investors, annuities can help the investor grow his retirement funds at a predictable rate while avoiding taxes. Maintaining a stable level of predictability helps to calm the fears of market downswings for all investors who are averse to high risk accounts. There are various types of annuities that exist, with all slight variations that may or may not appeal to each investor, depending on his aversion to risk.

With annuities, the investor can get his funds back when he retires in a percentage that is entirely based on his discretion and on his fluctuating needs from year to year. Variable annuities, for example, allow the investor to place his funds in several mutual fund accounts that may appeal to his level of risk, growth objectives, and retirement needs. Nevertheless, the amount of those return payments ultimately depend on the amount of the initial investments, the type of annuity chosen, the length of time that has passed, and the performance of the market.

A portfolio with several annuity accounts can all have various distribution or pay days that can supplement other investments the investor has made. With the predictable fluctuations in the market, fixed annuities generate the attention of conservative and frugal investors who would like to foresee a steady and dependable rate of return.

Further, the investor can either elect to be paid out all at once in one “lump sum” or in periodic installments for period of time, say 10 to 30 years – or until his or her death. For example, an investor can, at the age of 65, decided that he will withdrawal 6% a year for the next 20 years from his account. The longer the investor waits to make good on those withdraws, the more percentage or amount he would be able to take each month.

They offer a more safe return on their initial investment and are particularly beneficial to those retired or near-retirement, as they have less room for wide market fluctuations. When the stock volatility displays itself, as it often does from time to time, those investors who have place some of their earnings in fixed annuities will maintain a steady stream of income and negate much of the financial losses that traditional stocks may experience. Most investors will find that fixed annuities can play an important role in their retirement goals. They provide delayed or deferred income streams while increasing that growth without the hassle of taxes.