A growing number of individuals looking for new sources of retirement income are considering annuities. An annuity is a type of contract between a private individual and a financial services or life insurance company. The individual pays a sum of money that is invested and in return the company makes periodic payments to the individual as specified in the contract.
Annuity earnings are tax deferred, which means federal income taxes on gains are not payed until funds are withdrawn. Most annuities allow you to contribute additional money at any time. The Insurance Marketplace Standards Association (IMSA) suggests you consider some key questions if you are thinking of purchasing an annuity:
Is the annuity I’m considering the right one for me?
Be sure you understand what you’re buying. Review the product and consider whether it is the most appropriate for your age, personal financial needs and objectives and risk tolerance.
Will you need the money you’re spending on this annuity in the next few years?
Annuities are designed for the long term. If you decide to withdraw the money in the next few years, you may be subject to fees...
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