What's the Annuity Advantage?

When considering the annuity advantage, the tax-deferred accumulation of assets immediately comes to mind. Another annuity advantage involves the fact that annuities can provide both low-risk and high-gain potential for investors.
Best of Both Worlds

All investors want their money to grow, but some are willing to take more risk than others. The wide variety of annuities available today offers many potential solutions for all types of investors.

Annuities are contracts made between an insurance company and an investor. The investor makes payments to the insurer, either over a period of time or as a single lump sum payment, in exchange for a promise from the insurer to provide future income over a certain number of years when the investor retires.
Attractive Annuity Features

As mentioned above, annuities offer investors the opportunity to accumulate assets on a tax-deferred basis. No mandatory contribution limits are imposed on annuities by government regulators, so investors can put as much money as they want into the plans without worrying about going over the federal tax limits.

Annuities can provide either fixed or variable returns. Fixed annuities offer investors a guaranteed return as long as their money stays in the plan for the life of the contract. Rates may be adjusted over time, but they will never drop below the guaranteed minimum rate stated in the annuity contract. With variable annuities, premiums paid by investors will be allocated to several investment sub-accounts, which have a range of risk. The individual investor can choose the accounts he or she wants to use, deciding how much risk to take on in order to obtain higher returns.

Annuities offer the option of receiving fixed income payouts. This arrangement provides a lifelong income. The owner of the contract may have the annuity funds paid out over his or her lifetime, or over the joint lifetimes of the owner and a designated beneficiary.
Seek Advice Before Buying

Investors should remember that annuity advantages vary according to the type of annuity contract purchased. It is important to select the right mix of features and benefits in order to maximize the potential of an annuity plan. Therefore, before buying any annuity product, it's best to consult with a financial professional. A trusted adviser will be able to help investors decide which annuities are right for them. In general, however, the combination of tax-deferred accumulations, security, and flexibility makes annuities very attractive in a wide range of circumstances.