What are Annuities?

An annuity is a contract sold to an investor by an insurance company that pays fixed or variable payments at some future period. Its main benefit is tax deferral of gains and a consistent payout.

Money accumulates in an annuity tax-deferred, like an IRA or 401K plan. However, there is no current-year tax deduction as there is for IRAs.

There are several flavors of annuities:

  • immediate payout
  • deferred payments
  • fixed return
  • variable return

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