When planning for a financially secure future, especially retirement, understanding various investment options is crucial. Annuities are one such investment tool that offers a unique set of benefits. Annuity investment returns depend on a number of factors, including the performance of the index it's invested in, the cap on potential interest, and any fees associated with the annuity.
An annuity is a contract between an individual and an insurance company. It provides a steady stream of income in exchange for a lump-sum payment or a series of payments made by the individual. The income payments can start immediately or be deferred until a later date, such as retirement. Annuities are often used as a retirement savings vehicle, offering a guaranteed income stream for life.
One of the key advantages of an annuity is the tax-deferred growth it offers. Money inside an annuity grows tax-deferred, meaning that gains on the amount of premium invested in the contract accumulate without taxes due until the money is withdrawn. This can be particularly beneficial for individuals looking to maximize their retirement savings and minimize their tax liability.