You want a steady income stream during retirement — and an annuity may be just the ticket. But first, you need to understand annuities and their many choices. Basically, an annuity is a contract with an insurance company that promises a certain amount of money on a periodic basis for a specified time. Your contributions have tax advantages; investment earnings grow tax-free until you start withdrawals.
A deferred annuity is a contract between you and a life insurance company. Funds are exchanged for a promise to provide a competitive rate of interest with a minimum interest rate guarantee while guaranteeing the principal investment as well. The benefit payments don't start until perhaps 10 or 20 years down the road. The longer you wait for the payments to kick in, the more you'll get.
Annuities are financial products sold by insurance companies that allow you to put aside money, have it increase each year without paying taxes and then trigger a stream of future payments on a timetable you can control. Unlike IRAs, there's no income limit on how much you can place in an annuity.
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