What is an annuity?

Proper planning is the only way to make sure your income lasts as long as you do. That is where an annuity can help. Simply put, an annuity is a contract between you and the insurance company allowing you to invest money now (in several payments or all at once) and receive a series of income payments later. You generally have the option to receive those payments for your entire life or for a specified period of time.

What are the two types of annuities?

Fixed annuities offer more conservative investors the comfort of principal protection and stable returns guaranteed by the insurance company. The company invests the money for you and guarantees you a fixed rate of return. At certain intervals (generally every one to three years) this fixed rate may go up or down to reflect overall market conditions.

Variable annuities enable you to participate in the risks and rewards of the world’s stock and bond market. You direct your payments into a range of investment options depending on your market risk.

What is the difference between a Deferred and Immediate Annuity?

Deferred annuities allow you to make payments over a period of time called the accumulation period and then you receive a series of income payments at some time in the future.

Immediate annuities allow you to make a single lump-sum payment to the insurance company and you begin receiving income payments immediately.

Both fixed and variable annuities offer several types of income payment options: payments for a specified period of time, payments for your lifetime, or payments for the lifetime of both you and your spouse.

Both fixed and variable annuities offer several types of income payment options: payments for a specified period of time, payments for your lifetime, or payments for the lifetime of both you and your spouse.

What are some tax advantages of annuities?

Any growth inside a annuity is tax deferred because these earnings are not subject to current federal, state, or local income taxes, every dollar you invest can grow and compounded until you withdraw it from your annuity.

Be sure to keep in mind that because an annuity is designed as a retirement planning vehicle, there are penalties for withdrawals prior to age 59 1/2. There may also be surrender charges and tax consequences associated with lump-sum withdrawals.

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Bedrosian & Associates

Address: 525 Veterans Blvd., Suite 102 Redwood City, CA 94063

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