Annuities

An annuity is a contract issued by an insurance company. It is a unique financial product that provides tax deferral of interest and capital gains and the option (if funds are annuitized) of a guaranteed monthly income for life. Although annuities can serve various needs, the primary purpose of an annuity is that of a retirement vehicle for the annuitant, the person who will usually receive the annuity benefits. The annuity is an attractive retirement vehicle because the money accumulating in an annuity, grows on a tax deferred basis. There are two parts to an annuity: the accumulation phase and the distribution phase.