What Is An Annuity?
Q: What Is An Annuity?
There are two basic types of annuities: deferred and immediate. Most annuities sold in this country are deferred annuities. An annuity is a tax-deferred vehicle for savings that can be converted to a stream of income payments at the option of the owner. Few annuities are converted in this way, however. Most annuity owners prefer to keep the cash available for withdrawal.
Many annuities are sold through seminars in which a financial advisor tells the audience that annuities are a method of protecting their assets, avoiding income tax on their social security income, and a wonderful investment that will not only beat other investment returns, but guarantee certain payments regardless of how the investment actually performs. However, there are quite a few disadvantages to purchasing annuities that most advisors don’t emphasize.
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